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South Africa as a sourcing destination

"If Africa features in your business plans, then it is certainly time to consider South Africa as a potential sourcing destination." 


Manish Khandelwal and Huw Watkins, PA Sourcing experts

Manish Khandelwal and Huw Watkins

31 January 2013

Every time we sit with clients and South Africa is mentioned, our eyes light up. Having worked there, we find it difficult to understand why the country so rarely makes it onto their short list of preferred sourcing destinations, especially as the advantages of established locations begin to wane.

South Africa has a welcoming, service-orientated culture, good infrastructure, decent European language skills and a strong pipeline of graduates, school leavers and other qualified staff. It’s in the same time zone as mainland Europe and, compared to established European locations, is cost competitive. So why is the country falling behind in the race to become a leading outsourcing destination?

The devil as always is in the detail. In this case, it lies in fear of the unknown and uncertainty, both of which cloud the lens through which businesses assess the country’s credentials.

Many studies point to crime as the major roadblock. It’s true that the crime rate is high but, equally, press coverage of this problem is sometimes exaggerated. However, add recent political uncertainty and strikes to the mix and the picture starts looking bleak to the uninitiated. 

Getting access to the right range of skills also throws up another challenge. While the country enjoys a decent skill base at junior levels and attrition is relatively low, a lot more needs to be done to develop the middle-management skills so crucial to running a sustainable operation.

High unemployment means the government is understandably wary of opening up its labour market to foreign nationals but foreign investment that creates local jobs is another matter, surely? Sectors such as IT that require strong technical and managerial skills, and have the capability to generate high levels of employment for locals in the long run, need to be treated differently. Our view is that the government must design its policies around the needs of the sourcing sector, review its work permits processes and timelines, and relax norms to make it easier for companies to set up and operate out of the country.

So where does this leave your business?

The African story is certainly taking shape – and South Africa is a gateway to doing business in the African continent. The country’s economy is growing, attracting investment from both the East and the West, and has been showing the way to other African countries.

If Africa features in your business plans, then it is certainly time to consider South Africa as a potential sourcing destination. If you are a service provider keen to hedge your bets, then South Africa is certainly worth looking at.  And if you are an end user and already have a presence in South Africa, the captive sourcing opportunity is worth exploring.

However, if the African continent doesn’t feature in your company strategy, then South Africa has some more work to do before it emerges as a true contender. It cannot compete effectively on junior-level skills and infrastructure alone.

Nobody can deny one thing though. It’s just about time for Africa. Oh – and did we mention the fantastic weather?

Manish Khandelwal and Huw Watkins are sourcing experts at PA Consulting Group

To visit PA's pages on shared services and outsoucing, please click here.

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