Three South African cities positioned as prime outsourcing hubs
South Africa is establishing itself as a successful emerging offshore destination for voice and non-voice outsourcing services, with Cape Town, Johannesburg and Durban positioning themselves as the country’s outsourcing hotspot trio.
According to the 2015 Tholons Top 100 Outsourcing Destinations report, which ranks cities in terms of outsourcing attractiveness, Johannesburg, Cape Town and Durban are ranked 21, 57 and 100respectively.
Notably, South Africa’s cost-effectiveness works in its favour and the country offers 40-45% lower cost compared to near-shore locations in the UK (Northern Ireland etc.) and 10-20% lower than locations in Central and Eastern Europe (Czech Republic, Hungary, Romania).
Deloitte BPaaS Western Cape Leader, Wendy Smith says South Africa’s value proposition is not only about cost. “It is enhanced by factors such as a skilled workforce, government support, high cultural compatibility and time zone overlap with European countries.”
Despite being distinctive in nature, Johannesburg, Cape Town and Durban offer complex services in the business process outsourcing (BPO), information technology outsourcing (ITO), knowledge process outsourcing (KPO) and legal process outsourcing (LPO) services as well as the traditional voice service capabilities.
As one of the most populated areas in the Gauteng province, Johannesburg houses a substantial and highly skilled workforce and labour retention. The city’s well-placed location means that several companies operating in Eastern and/or Southern Africa establish their headquarters in Johannesburg, providing opportunities for BPO service providers based in the city. Johannesburg’s proximity to the administrative capital, Pretoria, further boosts its locational advantage.
The region’s strength lies in Finance and Accounting, Customer Relationship Management (CRM), payroll and recruitment services. The city is also well equipped to provide services related to Information Technology, Procurement, KPO and Human Resources Outsourcing.
Although Cape Town is ranked lower than Johannesburg in the Tholons list, it is the destination of choice for many prospective organisations seeking an outsourcing destination. .
Cape Town boasts a large talent pool emanating from some of the country’s top universities and Further Education and Training (FET) colleges. Linguistic capabilities other than English, an improving risk profile and good quality infrastructure (road, power, healthcare) further enhance the city’s outsourcing capability.
Cape Town boasts a number of recognised outsource service providers and is able to cater for a rising global demand. It also hosts captive centres for companies such as BP, ASDA, Amazon, Lufthansa, Google and DHL.
Durban has been a key contributor to South Africa’ BPO segment since 2006. Lower cost of operations, good infrastructure and talent with linguistic capabilities position Durban as a preferred location for many.
From a cost of operations perspective, Durban is better placed than Cape Town and Johannesburg. Estimates indicate that the cost of operations in Durban is 5% lower than Cape Town and salaries in Durban are 15% to 20% lower than those in Johannesburg.
The quality of talent for sales and outbound campaigns in Durban is better than the other two cities and labour competition lower. Accessible transportation and the presence of various ethnicities also work in favour of Durban. In addition, the development of a new BPO Park at Dube Trade Port is expected to add to Durban’s prominence.
Durban caters predominantly to clients based in the UK, such as Carphone and TalkTalk, and Australia, such as Westfarmers Australia and Coles Insurance. It supports clients in the manufacturing, financial services, retail and telecom sectors, with the primary focus on technical support.
Smith says political stability and the relative maturity of skills for transactional shared services have played a significant role in South African cities being chosen as preferred destinations. “Future prospects for the country growing as a preferred outsourcing destination look promising as these and other factors used to determine an outsourcing location favour South Africa.”