Outsourcing to South Africa offers a host of opportunities for businesses of all sizes. Here are some questions to consider.
Disatisfaction with the world’s lowest cost outsourcing destinations has led many companies to look for alternatives. South Africa, with its relatively cheap labour costs, robust infrastructure, and highly educated and diverse workforce, seems like the perfect option. Those looking to make the move will naturally want to weigh up the various pros and cons.
Outsourcing to South Africa: the pros
South Africa’s growing economy offers a combination of outsourcing benefits.
• Low cost of living: The most popular reason for outsourcing to South Africa remains cost. South Africa benefits from a low cost of living, which translates to wages. Unemployment is very high, which means there is a good supply of talented professionals eager for work. As a UK-based company, for example, you’ll be able to access skilled labour at a fraction of the cost back home.
• Skilled workforce: Those lower costs, though, don’t mean you have to sacrifice anything on quality. Education rates have been improving rapidly across South Africa, which makes for a good supply of skilled professionals at all levels. This has enabled companies to go beyond basic work functions and set up multidisciplinary teams within South Africa, which can support their domestic teams and widen their talent pools. This can be particularly useful for small businesses, which are often limited to their local area in terms of who they can work with. Domestic professionals in some areas, such as software development, can be hard to find and come at a premium.
• Excellent infrastructure: The South African BPO sector is backed up by a robust technological, logistical, and regulatory infrastructure. High-speed internet is freely available in the major cities across the country, which facilitates real-time communication and collaboration. Thanks to the magic of video calls and instant messaging, outsourced staff can now be a simple extension of your domestically based team.
Cloud computing means multinational teams can easily collaborate on individual documents simultaneously. There is no delay in awaiting feedback or amendments to existing work stacks.
The credibility of outsourcing in South Africa also stems from a robust regulatory and governance structure. They have seen issues with fraud and scams in other outsourcing destinations and set out to avoid similar problems.
Outsourcing companies in South Africa maintain a commitment to best practice in governance around issues such as data protection and cybersecurity. South Africa’s data protection laws run along similar lines to other major regulatory regimes such as GDPR,
which makes it easier to transfer data from one territory to another without encountering compliance issues.
Quality is crucial to the success of the outsourcing sector in South Africa, and they have made that their main goal. With a strong network of trustworthy companies, backed by state-of-the-art technology and highly trained professionals, hiring companies expect the highest possible levels of customer service.
Government support: South Africa’s government has been quick to identify the opportunities of the outsourcing sector and back it up with an extensive network of government support. Companies that provide jobs for people in South Africa can benefit from multiple tax breaks, grants, or other incentives that further boost the argument for South Africa as an outsourcing destination.
When added to the substantial discounts in the labour market, the potential cost/benefits analysis of outsourcing to South Africa becomes even more compelling.
Outsourcing in South Africa: the cons
As with anything, though, there are other factors to consider, including:
• Wages: Although wages are substantially lower than in countries such as the UK, they are higher than in traditional outsourcing powerhouses such as India and the Philippines. Those companies that purely look at this from a bottom-line perspective, therefore, may be tempted to stick with the existing outsourcing option. However, this only tells part of the story. As mentioned above, the government has been keen to support the outsourcing sector with grants and other incentives for companies that provide jobs for South African employees. Once those are taken into account, South Africa may well turn out to be every bit as cheap as the likes of India.
• Regulatory compliance: Any company operating in South Africa will have to comply with strict labour and tax laws. Any found to be in contravention could face strict fines. Labour laws are relatively liberal with clear protections in place to protect the rights of employees. Companies working in this space will need to understand their obligations to their workforce and make sure there are no unintentional gaps. Likewise, companies will also need to ensure all taxes are filed at the appropriate time and that they have met the filing expectations of the authorities. As with any country, reporting expectations can vary, making it easy for foreign-based companies to make mistakes. These risks can be reduced by hiring a local organization to offer support, such as an Employer of Record. These serve as the legal employees for all your South African-based workers, which also means they retain liability for any compliance issues. As a hiring business, you can benefit from their sector-specific expertise while being protected from legal liabilities.
• Worker classification: Businesses can hire South African professionals on all sorts of different terms, including direct employees and self-employed contractors. Hiring people on a contract basis is relatively straightforward, as the worker handles his or her tax obligations. As such, it’s often a good place for people to start. However, as the working relationship becomes more regular, it can blur the boundaries between freelance and full-time employment. The authorities are hot on any practices they feel could be disguised employment, namely companies attempting to present defector employees as freelancers. Fines can be high, and if they feel it’s intentional, you could face criminal prosecution. Working with an EOR and Agent of Record or a professional employers organization can help you make sure all workers are classified correctly and all laws are respected.
• Data protection: South Africa’s protection of personal data law poses strict requirements to maintain high levels of cybersecurity and be transparent about how all personal data is stored. It works similarly to other international laws, such as GDPR. However, it has its nuances which can take some getting your head around. Transferring data across international borders also comes with an inevitable risk. When handing data over to third parties such as BPO companies or EORs, you rely on their cyber processes to keep your data safe. The good news is that there are plenty of highly developed organisations with first-world levels of technological infrastructure that maintain the best cybersecurity practices. Some due diligence would be sensible when choosing a partner with whom you will be sharing any data.
Overall, though, the outlook for outsourcing in South Africa is extremely positive. It offers a unique combination of quality, affordability, location, and convenience that is hard to get anywhere else. Small wonder, therefore, that it is fast becoming the go-to outsourcing destination of choice for companies across the West.
If you’d like any support in your outsourcing strategies, feel free to get in touch with our friendly team, who will be happy to help.
