UK and India cashing in on South Africa
A stable, highly targeted and generous government incentive from the South African Department of Trade and Industry, along with falling telecoms costs, have boosted outsourcing in South Africa in the last half-decade, and prospective outsourcers are not the only ones who have noticed. Whereas the sight of new contact centres opening up has become a common feature of South Africa’s larger cities this millennium, the Rand’s steep decline in 2013 has seen a new phenomenon emerge: overseas firms – particularly from the UK and India – have gone on a spree of acquisitions of South African outsourcers.
WNS, a major Indian outsourcer, bought 1500-seat South African BPO concern Fusion Outsourcing Services from its British owner, BFSL, for £10m in June. Shortly afterwards, British behemoth Capita snapped up Cape Town’s Full Circle with the promise of half a billion Rand in investment to come.
“India and the UK are realising the potential of the South African market and the message it is sending to the international market is enormous” said Gareth Pritchard, CEO of Business Process Entreprsie South Africa (BPeSA).
The existing trend towards South Africa as a BPO base, which is based on the country’s solid value proposition, has only accelerated as a cause of the weakness of the Rand. The factors which have contributed towards the steep fall in the Rand’s value in 2013 – disasters like Marikana, and the deep issue of labour unrest which gave rise to it, as well as the general performance of President Zuma across a range of areas – have not dampened enthusiasm for the country in the global BPO sector. These firms perceive their ventures to be mostly immune to the kind of deep-seated labour problems that affect mostly unskilled workers and the sectors that employ them – mostly mining and agriculture.
The remaining hurdle towards South Africa’s emergence as a globally important BPO hub has always been the cost of telecommunications in a country that is essentially marooned at the end of a long continent with an extreme lack of high-bandwidth infrastructure. This positioning makes South Africa somewhat of an island – the cost of laying sea cables to Mzansi is high, and there is as yet little demand by neighbouring countries for an economical volume of ancillary connections.
This cost differential with other BPO destinations is finally being eroded by the arrival of new sea cables. However, the tumble in the Rand’s value has brought prices down as much as several years of real investment in telecoms infrastructure; in effect, this has catapulted South Africa several years ahead in terms of competitiveness. According to Pritchard, the remainder of the price differential can be counterweighed by Government schemes. ”We are still not competitive as far as telecom costs go, but this is offset by the incentives.”
BPeSA Western Cape hopes that the province will be able to create another 10,000 fulltime jobs serving offshore clients over the next three years, according to Pritchard. The Fusion and Full Circle transactions – along with a significant investment into the Western Cape by British firm Serco – put the province on track to meet its goal, he added.