How South Africa became one of the most attractive destinations for outsourcing business

South Africa has emerged as one of the best business outsourcing hubs in the world. The rainbow nation has become the most favored by buyers of contact center services in major Western demand markets, according to the annual 2020 Front Office BPO Omnibus Survey conducted by Ryan Strategic Advisory.

The feat has largely been due to the country’s reputation as a reliable, cost-effective, and high-quality destination for outsourced business services. As a show of confidence in South Africa’s robust business outsourcing, Amazon in June announced that it would be hiring 3,000 people in South Africa this year to support customers in North America and Europe.

South Africa is one of the countries in the world badly hit by the coronavirus pandemic and this announcement by Amazon to add 3,000 jobs could not have come at a better time. The country’s economy contracted by a stomach-bottoming 51 percent in the second quarter on an annualized basis, government data show. 

“This is the first time in history that the South African economy has contracted for four straight quarters,” Statistician-General Risenga Maluleke told a news conference in August.

“While lockdown measures to contain the coronavirus compromised business continuity across the world, South African contact centres were quick to migrate to remote working models and were able to remain operational with minimal disruption for clients,” according to a new McKinsey report. 

Strong operational and service capabilities in the sector are among the reasons that service exports have been identified as an inclusive growth sector in McKinsey’s “South Africa Big Five” report.

South Africa’s BPO sector currently employs over 270,000 people in six cities, 65,000 of whom serve international clients. This total staff base could grow to over 775,000 jobs by 2030, with up to two-thirds of these in the service of overseas markets.

“If stakeholders act decisively and strategically, the sector can build on its reputation and the resilience it has demonstrated in recent months and position itself for further growth,” the report said. McKinsey values South Africa’s BPO sector at $461 million, $272 million of which is attributed to traditional BPO, while Business Process as a Service (BPaaS) is valued at $188 million.

The solid performance of South Africa’s BPO sector is due, in part, to the backing it has received from the national government, according to McKinsey. The Department of Trade, Industry and Competition has been instrumental in increasing the number of workloads servicing international markets through the funding of approximately R1.3bn ($78m) between 2007 and 2018, with a further R1.2bn ($72m) committed in 2019 for sector support and other operational-improvement support programs.

Furthermore, the BPO industry was given essential service status which ensured that local providers could continue to serve their clients during the lockdown.

Also, it helps that English is one of the languages spoken in South Africa as English-speaking countries such as the United Kingdom, United States, Canada, Australia, New Zealand and Ireland are key markets for South African BPO providers, according to McKinsey.

The report added that local BPO players that can tackle the language requirements, can also compete for businesses from companies in Saudi Arabia, Israel, Thailand, China, Indonesia and Portugal.