Analysis of South Africa as a BPO Delivery Location 2015 - Compiled by Nelson Hall - bpesa
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Analysis of South Africa as
a BPO Delivery Location
2015
Compiled by Nelson Hall
Analysis of South Africa as a BPO Delivery Location Table of Contents Introduction 2 A. Objectives and Scope 2 B. Methodology 2 C. Structure of the Report 2 Executive Summary 3 A. Evaluate as “Onshore-Equivalent” for Contact Center Services 4 B. Evaluate for Revenue-Generating Capability in Support of Online Businesses 6 C. Evaluate as GDN Center within Financial Industry-Specific & for Africa-to-Africa Back-Office Services 6 International Contact Center Services 8 A. Business Challenges Faced & Drivers for Offshoring to South Africa 8 B. Sectors Served and Services Delivered from South Africa 9 C. Benefits Achieved from South African Service Delivery 13 D. Contact Center Services Delivery Cost Structure 13 Financial Industry-Specific Services 14 A. Business Challenges Faced & Drivers for Offshoring to South Africa 14 Skills Availability & Government Incentives 16 A. Skills Availability 16 B. Government Support & Incentives for BPO 16 Companies Delivering Services from South Africa 23 Contact Center Services 23 A. Aegis 23 B. Amazon 24 C. Barclays Africa Group Limited 24 D. Capita 25 E. Coracall 26 F. Merchants 26 G. Mindpearl 30 H. OUTsurance 30 I. Outworx 31 J. Sanclare 32 K. Serco 33 L. Shell 35 M. Teleperformance 36 N. WNS 36 O. Webhelp 37 Financial Services Industry-Specific BPO 38 P. Kleinwort Benson 38 Offshoring Support Services 39 Q. EOH 39 R. KPMG 40 List of Exhibits Services Delivered from South African Contact Centers by Sector 5 Financial Industry-Specific Services Delivered from South African by Sector 7 Profile of Organizations Using South African Contact Center Services by Sector 9 Profile of Sectors Using South African Contact Center Services by Number of Call Center FTEs 9 Services Delivered from South African Contact Centers by Sector 12 Financial Industry-Specific Services Delivered from South African by Sector 14 BPS Incentive Qualification: dti Evaluation Criteria 17 BPS Incentive Bonus Scheme: Non-Complex Jobs 19 BPS Incentive Bonus Scheme: Complex Jobs 20 B-BBEE Generic Scorecard 21
Analysis of South Africa as a BPO Delivery Location
About NelsonHall
NelsonHall provides buy-side and sell-side organizations with deeper research and
analyses in front office, mid-office and back office BPO than any other research
firm in the world. The company’s subscription-based model provides subscribers
with robust market analyses, case studies, vendor assessments, contract analyses,
market reports and access to a content-rich BPO contracts database. The firm
covers a wide range of industries including financial services, government and
utilities sectors, and tracks worldwide and regional BPO activity. NelsonHall’s home
page is: research.nelson-hall.com.
The company tracks business services activity. In particular, NelsonHall focuses on
the following business services and process areas:
• Front-office customer management services
• Middle office industry-specific processing services such as network and
work management
• Back office support services such as HR services, finance & accounting services,
and procurement services
NelsonHall provides information to its clients in a variety of forms, including within:
• NelsonHall’s BPO subscription services, to assist organizations in developing
sourcing strategies and in supporting individual sourcing projects including
vendor short-list development
• Workshops, to assist organizations in identifying the most appropriate areas
of BPO for their organization
• Business case development, to assist organizations in deciding whether BPO
is appropriate for individual processes
• Custom assessments, to assist buy-side organizations in benchmarking
individual processes and to assist vendors in successfully taking BPO concepts
to market.
For more details, contact:
U.S. U.K. France
Riverside Center Atrium Court, The Ring NelsonHall
275 Grove Street Bracknell 4 place Louis Armand
Suite 2-400 RG12 1BW Tour de l’Horloge
Newton U.K. 75012 Paris
MA 02466 Phone: +44 (0)1344 393036 France
Phone: (617) 663 5737 Phone: +33 1 72 76 26 54
1
Introduction
A. Objectives and Scope • Voice and non-voice support for the domestic South
African market.
The purpose of this report is to assess the role
of South Africa as a BPO delivery location for This report will focus on the first two of these market
international companies. segments and on the opportunity for organizations to support
their international operations from South Africa.
The objectives of the report are to identify:
By service type the scope of the report is contact center
• The experience of organizations that use South Africa services, financial industry-specific services, and back-office
for international BPO service delivery services such as finance & accounting
• The drivers for use of South Africa for delivery of BPO
services for both contact center services and for financial
industry-specific & back-office services B. Methodology
• The profile of companies using South Africa BPO service
delivery by industry sector The survey is based on interviews with executives from
• The profile of international service delivery from South organizations, both end user companies and suppliers that
Africa by service type are currently using BPO services based in South Africa in
• The benefits sought from South African service delivery support of their international operations.
and the profile of benefits achieved
• The delivery cost structure associated with South Africa,
including details of government incentives. C. Structure of the Report
South African “BPO” service delivery typically covers The report is structured into the following chapters:
three areas: Chapter I: Introduction
Chapter II: Executive Summary
• International contact center services Chapter III: International Contact Center Services
• International non-voice services typically covering Chapter IV: F inancial Industry-Specific & Back-Office Services
industry-specific financial services processes and back- Chapter V: Skills Availability & Government Incentives
office processes such as finance and accounting Chapter VI: C ompanies Delivering Services from South Africa.
2
Analysis of South Africa as a BPO Delivery Location
Executive Summary
Organizations have in the past often polarized their • Secondly, there is an increased focus on
service delivery between use of onshore centers for using customer service to drive sales and
delivery of high customer experience and complex revenue protection through techniques such
processes and low cost offshore centers for simple as welcome calls, health checks, and proactive
transaction processing and customer service customer interventions.
cost deflection.
This is changing the skills required of agents, with a
However, the world has changed. While organizations much greater requirement for agents to be able to build
still have a strong need to reduce their customer service empathy with customers. Accordingly, the increasing
costs, they are typically looking to do this through requirement from offshore customer service locations
increased use of electronic channels and by improving is to be able to offer “onshore-equivalent” customer
customer journeys rather than at the expense of the service or even “onshore-exceeding” customer service
customer experience. Indeed the most common need at a lower cost of service.
expressed by organizations in the area of customer
service at the present time is the desire to reduce their In this scenario, South Africa is worthy of consideration
customer service costs while maintaining their customer for “BPO” delivery whether via a captive or offshoring
experience and levels of customer satisfaction. This approach, since it offers an alternative to onshore
is typically accompanied by a longer-term vision to services for delivery of high levels of customer
continue improving their customer experience and experience and empathy and the ability to handle
customer satisfaction while retaining this lower cost point relatively complex processes. In particular, organizations
of operation. seeking new BPO delivery centers whether for captives
or outsourced service delivery should evaluate
At the same time, the balance in customer service is South Africa as:
shifting. This is the result of two factors:
• An “onshore-equivalent” for contact center services
• Firstly, the move to electronic self-service for simple • A location with strong revenue-generating capability
queries is in itself shifting the focus of customer in support of online businesses
service delivered by agents to the more complex end • A GDN Center for financial industry-specific services
of the customer service spectrum and for delivery of “Africa-to-Africa” shared services.
3
A. Evaluate as “Onshore-Equivalent” for Contact
Center Services
The profile of customer service delivered from South Africa does not lend
itself to lowest-cost offshoring where low-cost scripted call-handling rather
than the quality of the customer experience is the main consideration for the
client organization.
The type of international customer service being delivered from South Africa
is best suited to organizations seeking onshore-equivalent levels of customer
experience based on metrics such as net promoter scores and high first contact
resolution rates at a lower price point than onshore service delivery.
Amazon for example is ramping up its customer service from South Africa
and is recruiting “free-thinking” agents with the remit to focus on solving
the customer’s problem. The agents are not scripted, which is typical of
South African contact center services, and are authorized to take whatever
action they feel is appropriate to achieve resolution and a high level of
customer experience.
Accordingly, it is most appropriate for organizations to establish customer
service delivery from South Africa where they are seeking an onshore level of
customer experience either at a significantly lower cost point than is available
onshore or to complement existing onshore capability where recruitment
onshore is proving challenging.
The benefits currently achieved by organizations using contact center services
for International customer service, typically to the U.K. and Australia, are, again
in order of number of mentions:
• Equal or better customer experience (CSAT or NPS) relative to onshore
delivery. The majority of organizations are matching onshore delivered
customer experience at a lower price point, though approximately a third of
organizations reported that their South African delivery was outperforming
their onshore delivery
• Cost savings (averaging 40% and typically in the range 30% to 50%)
compared to onshore service delivery from the U.K. and Australia
• High first call resolution rates
• Ability to deliver more complex end-to-end processes than from other
offshore delivery locations
• Matching and frequently outperforming onshore delivery in sales and
debt collection
• Ease of management due to time zone compatibility.
4Analysis of South Africa as a BPO Delivery Location
In terms of type of service delivered, the emphasis is typically on end-to-end
customer service across a range of customer query types. The profile of services
delivered from South Africa in support of international customer service is shown
in Exhibit II-1.
Exhibit II-1
Services Delivered from South African Contact Centers by Sector
Sector Examples of Services Supported
Telecoms/ISPs -- Inbound customer service including billing support
-- Outbound sales & cross-selling including contract renewals, welcome calls &
health checks
-- Provisioning & fault management
Online retailing/home shopping -- Inbound customer service including delivery support and credit card
processing in support of online orders
-- Outbound revenue protection, including out-of-date cards
& out-of-stock handling
-- Customer recovery operating off-process
Insurance -- Inbound customer service
-- Inbound & outbound sales including courtesy calling
-- Customer validation, fraud-checking and policy activation
Energy & utilities -- Inbound customer service in support of billing, meter issues, & outages
-- Debt collection
-- Up-selling & cross-selling
Airlines -- Reservations handling and flight changes
-- Loyalty program support
-- Travel agent support services
Banking -- Customer service
-- Collections
-- Application processing
Media -- Outbound renewals & cross-selling
In terms of volume, the dominant sectors at present are telecoms/ISPs and
online retailing/home shopping, though the level of International contact center
activity in the energy & utilities sector has increased significantly in recent years
and South Africa has strong financial services domain expertise and provides
contact center expertise in addition to industry-specific services to international
banks and insurance companies.
In addition to English-language work, which currently accounts for
approximately 90% of international contact center services from South Africa,
South Africa also provides European language customer service, with for
example Amazon and an airline both providing German language customer
service from South Africa.
5B. Evaluate for Revenue-Generating Capability in Support
of Online Businesses
South Africa has a strong capability in supporting revenue generation and revenue
protection within International contact center services.
Reasons why organizations have chosen South Africa in preference to other offshore
locations for International contact center services include:
• High level of cultural affinity between South Africa and U.K., Europe, and Australia
• The ability of South African agents to have a greater level of dialogue with, and
develop greater empathy with, customers than agents in other offshore locations
• The ability of South African agents to handle complex calls and to negotiate and do
deals, for example, in support of collections.
These latter two factors, combined with the ability of South African agents often to
outperform existing onshore centers in terms of the customer experience, are critical
to revenue-generation. South African delivery has traditionally been used in support of
collections because of these skills and more recently the industry has developed greater
capability in areas such welcome calls, health checks, and other soft-sales approaches.
To complement this, South African delivery has a particular strength in outbound calls
in support of these types of activity with approximately 27% of the International contact
center activity outbound-based.
Examples of existing “revenue-generating” services include:
• Outbound subscription renewals on behalf of a leading legal publications business
• Health checks in support of a major utility
• Health checks and contract renewals in support of a major ISP
• Cross-sales to existing mobile telecoms customers
• Support for group bookings for major airline
• Outbound revenue protection calling for major retailer
• Deployment of customer recovery team for major online retailer
• Order taking for major energy company.
C. Evaluate as GDN Center within Financial Industry-Specific &
for Africa-to-Africa Back-Office Services
While much of current international BPO service delivery from South Africa comprises
contact center services, there is also a significant level of international service delivery
around financial industry-specific and back-office services.
The majority of these services are banking and insurance industry-specific services,
though South Africa should also be considered as a potential location within an
organization’s global delivery network for back-office shared services in areas such
as finance & accounting and human resources for “Africa-to-Africa” support, with
organizations increasingly using South Africa as the basis for their African shared
services hubs.
Examples of services delivered from South Africa in support of financial industry-
specific services and back-office services are shown in Exhibit II-2.
6Analysis of South Africa as a BPO Delivery Location
EXHIBIT II-2
Financial Industry-Specific Services Delivered from South African by Sector
Sector Profile of Services Supported
Life insurance -- New business capture
-- Premium collections
-- Policy administration
-- Claims processing
-- Commission handling
Fund administration -- Investment & portfolio administration
-- Client reporting
-- Finance
Asset management -- Fund accounting
-- Business analysis
-- Client services
In general, South Africa remains suited to the more complex handling of
processes and customers within these domains, rather than the more basic
transaction processing, which is increasingly being automated.
The benefits achieved by organizations using South Africa for financial
industry-specific services are:
• Cultural match with clients and clients’ clients and ability to be accepted
and build relationships
• Ability to handle complex and specialized processing work that
cannot easily be handled out of other highly standardized offshore
processing centers
• Time zone benefits for complex tasks where frequent communication with
the client is required
• Cost reductions compared to onshore delivery of approximately 45%
• Presence of high-caliber financial services workforce for
non-voice services
• Staff more productive than alternative offshore locations for complex
processing tasks
• Customers more amenable to service delivery from South Africa than
from other offshore locations such as India
• Accent neutrality & cultural affinity.
Within back-office services such as finance & accounting and human
resources, South Africa is increasingly being used as a location for Africa-to-
Africa shared services. The principal reasons for choosing South Africa are:
• Its relatively high level of political stability compared to other countries
in the region
• The relative maturity of transactional SSC skills in South Africa.
7International Contact
Center Services
A. Business Challenges Faced & Drivers for Offshoring to South Africa
While many major organizations wish to reduce their cost Other significant factors mentioned included:
of customer service, they are typically no longer prepared
to do so at the expense of their customer experience. A • The ability of South African agents to handle complex calls
more typical current requirement is for organizations to and to negotiate and do deals, for example, in support
seek to initially maintain their current levels of CSAT while of collections
reducing their customer service volumes and costs, and then • The ability of South African agents to have a greater level of
to subsequently look to increase their CSAT at this lower dialogue with, and develop greater empathy with, customers
cost point. than agents in other offshore locations
• The existence of a population of second-generation
At the same time, there is considerable and increasing Europeans with native European language skills
emphasis on enhancing sales and on revenue protection, with • Availability of financial services skills
organizations doing this for example by introducing services • Prior familiarity with South Africa and ease of access to
such as welcome and check-up calls or dealing proactively client management.
with customer issues regarding card payment.
The three main locations for delivery of International contact
Accordingly, organizations offshoring contact center services center services from South Africa are:
to South Africa are not doing so in order to achieve maximum
customer service cost reduction. Instead, they are typically • Cape Town (approximately 66% of FTEs)
looking initially for an “onshore-equivalent” customer • Durban (approximately 22% of FTEs)
service to address their lack of onshore capacity, and/or are • Johannesburg (approximately 12% of FTEs).
endeavoring to achieve onshore-equivalence at a significantly
lower price point. Typically these organizations are “moving” Cape Town remains the key location for delivery of international
service delivery from onshore to South Africa but in other contact center services, though Johannesburg and Durban
instances they are reacting against the standard of customer are increasing in importance. In addition, the organizations
service from other offshore locations and looking for a higher interviewed for this study were increasingly reviewing additional
standard of customer empathy than that currently achieved locations such as Port Elizabeth, and both Johannesburg and
from those locations. Pretoria already figure strongly in the delivery of “Africa for
Africa” financial services customer service.
The principal business challenges faced by these
organizations and their drivers for considering offshoring to Although approximately 90% of International contact center
South Africa are: activity takes place in English, South Africa also provides
European language customer service, with for example Amazon
• Need to scale to support business growth and an airline both providing German language customer
• Lack of onshore capacity/difficulty in recruiting onshore service from South Africa, and customer services being provided
• Need to match onshore customer experience at lower in a wide range of European languages. The breakdown of
price point countries served by number of FTEs for non-African International
• Need for brand protection at lower price point contact center services is:
• Disillusion with customer service delivery from another
offshore location • U.K. 70%
• Experiencing high attrition onshore. • Australia 19%
• Continental Europe 11%.
The principal reasons for then choosing South Africa in
preference to other offshore locations for International In terms of call type, South African delivery has a particular
contact center services are (in order of number of mentions): strength in outbound calls in support of welcome calls, sales,
and collections with approximately 27% of the International
• The ability of agents to deliver the same quality of service contact center activity outbound and 73% of activity inbound.
as onshore much more cost-effectively
• Cost-effectiveness of service The main channel used in support of international contact
• High level of cultural affinity between South Africa and center services is still overwhelmingly voice. However, non-voice
U.K., Europe, and Australia services particularly around email handling and web chat are
• The high acceptability/familiarity of the South African increasing in importance, with for example both Merchants and
accent in the U.K. WNS estimating that a fifth or more of their activity is non-voice.
8Analysis of South Africa as a BPO Delivery Location
B. Sectors Served and Services Delivered from South Africa
Exhibit III-1 shows, on the basis of the organizations interviewed by NelsonHall,
the current profile of organizations using South African contact center services for
international customer service by industry sector.
EXHIBIT III-1
Profile of Organizations Using South African Contact Center Services by Sector
Sector Proportion of Organizations (%)
Telecoms/ISPs 37
Financial services 16
Online retailing/home shopping 13
Airlines 13
Energy & utilities 13
Other, including media & high-tech 8
Exhibit III-2 shows the profile of sectors using South Africa for international customer
service by current number of call center FTEs.
EXHIBIT III-2
Profile of Sectors Using South African Contact Center Services by Number of Call Center FTEs
Sector Proportion (%)
Telecoms/ISPs 40
Online retailing/home shopping 23
Energy & utilities 16
Financial services 11
Airlines 7
Other 3
This latter exhibit excludes a major financial services firm’s use of South Africa for
“Africa to Africa” customer contact services, which would increase the proportion
of FTEs within the financial services sector significantly.
South African delivery continues to be used strongly in support of the telecoms/
ISP sector by both Australian and U.K. organizations, with the adoption of South
African delivery by U.K. telecoms operators continuing to develop significantly
in recent years. At the same time, the mix of services provided in support of
telecoms operators has begun to become more sophisticated with an increasing
emphasis on soft-selling via welcome calls, health checks, and cross-selling.
910
Analysis of South Africa as a BPO Delivery Location
11Similarly, in the online retailing sector, sectors continue to be dominant, a South African delivery in support
Amazon continues to add to its sector which has adopted South African areas such as flight changes and
capability in South Africa, and other delivery more recently is the utilities complex itinerary booking in support
online retailers have moved beyond sector. Here U.K. utilities are increasingly of frequent flyers, while in the banking
simple customer service and inbound using South Africa for inbound customer sector, card companies continue
sales to incorporate outbound revenue service to provide support for billing, to use South Africa for application
protection services and customer meter issues, and outages, together with support and for collections, and
recovery teams. debt collection. the insurance sector uses South
African delivery for inbound and
While, customer service delivery from One constant theme is the ability outbound sales.
South Africa in support of both the of South Africa to largely match, or
telecoms/ISP and online retailing sectors exceed, onshore delivery in the delivery The profile of services delivered from
has been well-established for some time, of complex services where unscripted South Africa in support of international
and in terms of volume the telecoms/ customer interaction is required. Here, customer service is shown by sector in
ISP and online retailing/home shopping for example, a number of airlines use Exhibit III-3.
EXHIBIT III-3
Services Delivered from South African Contact Centers by Sector
Sector Examples of Services Supported
Telecoms/ISPs -- Inbound customer service including billing support
-- Outbound sales & cross-selling including contract renewals, welcome calls &
health checks
-- Provisioning & fault management
Online retailing/home shopping -- Inbound customer service including delivery support and credit card
processing in support of online orders
-- Outbound revenue protection, including out-of-date cards & out-of-stock
handling
-- Customer recovery operating off-process
Insurance -- Inbound customer service
-- Inbound & outbound sales including courtesy calling
-- Customer validation, fraud-checking and policy activation
Energy & utilities Inbound customer service in support of billing, meter issues, & outages
Debt collection
Up-selling & cross-selling
Airlines Reservations handling and flight changes
Loyalty program support
Travel agent support services
Banking Customer service
Collections
Application processing
Media Outbound renewals & cross-selling
In line with the “onshore-equivalence” of South African contact center services, the
range of customer service delivered from South Africa typically goes beyond simple
queries to handling the full range of customer services, including complex queries in
unscripted form.
12Analysis of South Africa as a BPO Delivery Location
C. Benefits Achieved from South African Service Delivery
Organizations using South Africa for contact center services are typically not looking
for the lowest cost location globally. Typically they are seeking onshore levels of
customer experience at a reduced cost. These benefits are currently being delivered.
The benefits achieved by organizations using contact center services for
International customer service, typically to the U.K. and Australia, are, again in
order of number of mentions:
• Equal or better customer experience (CSAT or NPS) relative to onshore
delivery. The majority of organizations are matching onshore delivered
customer experience at a lower price point, though approximately a third of
organizations reported that their South African delivery was outperforming their
onshore delivery
• Cost savings (averaging 40% and typically in the range 30% to 50%) compared to
onshore service delivery from the U.K. and Australia
• High first call resolution rates
• Ability to deliver more complex end-to-end processes than from other offshore
delivery locations
• Matching and frequently outperforming onshore delivery in sales and
debt collection
• Ease of management due to time zone compatibility.
The emphasis on effectiveness rather than absolute cost reduction is indicated
by the measures currently being used to manage contact center services in South
Africa, with organizations typically placing reduced emphasis on measures such as
average handling time (AHT) and increasingly emphasizing performance against
measures such as:
• Net promoter score (NPS)
• Other forms of CSAT
• First contact resolution rates (FCR)
• Sales conversion rates
• Collection success.
In line with this high emphasis on effectiveness, South African agents are frequently
handling calls unscripted, with organizations aiming for high levels of natural
communication in order to achieve high NPS scores.
Attrition varies by type of activity being undertaken but is generally perceived to
be lower than other offshore locations with several of the organizations interviewed
citing attrition rates significantly below 20%.
D. Contact Center Services Delivery Cost Structure
The cost of a contact center agent in Cape Town averages approximately £635 per
month (£1=ZAR18.9 at June 2015).
Telecoms & facilities costs add approximately 40% to this cost per agent for
international service delivery to the U.K.
This gives a total cost per FTE for contact center services from Cape Town starting at
approximately £11,000 per annum before government incentives.
13Financial Industry-Specific Services
A. Business Challenges Faced & Drivers for major global asset manager uses South Africa to handle
Offshoring to South Africa specialized financial processing that isn’t easily handled
from other offshore locations while CSC uses South Africa
The principal business challenges faced by organizations as a staging post for the roll-out of life BPO services to its
using South African service delivery for financial industry- Indian operations in support of its U.S. life BPO clients and to
specific services from South Africa were the need to address handle complex parts of the value chain. Similarly both Old
difficulties in scaling onshore delivery, and to support local Mutual and Discovery are seeking to build global financial
clients and begin to extend the organization’s presence both services shared service centers in South Africa, with both
in South Africa in particular and Africa in general. “Africa to new financial services product development and processing
Africa” delivery is becoming a major factor in the financial being concentrated in South Africa, while Kleinwort Benson
services sector. encourages its South African fund administration personnel to
build relationships with clients in Europe.
Accordingly, the reasons for organizations using South
African service delivery for industry-specific services were: Overall NelsonHall estimates that at present approximately
50% of financial industry- specific and back-offices services
• Time zone compatibility delivered from South Africa are English language based
• The high cultural fit with the U.K. with the remaining 50% being German, Dutch, and French-
• To generate South African business. based. While it is likely that the proportion of English-
language within this mix will increase as the industry scales,
Cost-effectiveness was frequently not an initial factor in South Africa remains a viable consideration for Continental
moving work to South Africa but became increasingly European back-office services within a company’s global
important after the financial downturn. delivery network.
In financial services, as in contact center services, South International Services Delivered & Why
Africa is typically being used for more complex processing Examples of services delivered from South Africa in
tasks, requiring high levels of expertise and frequently support of financial industry- specific services are shown
higher levels of customer engagement. For example, a in Exhibit IV-1.
EXHIBIT IV-1
Financial Industry-Specific Services Delivered from South African by Sector
Sector Profile of Services Supported
Life insurance -- New business capture
-- Premium collections
-- Policy administration
-- Claims processing
-- Commission handling
Fund administration -- Investment & portfolio administration
-- Client reporting
-- Finance
Asset management -- Fund accounting
-- Business analysis
-- Client services
In general, South Africa remains suited to the more complex handling of processes
and customers within these domains, rather than the more basic transaction
processing, which is increasingly being automated.
14Analysis of South Africa as a BPO Delivery Location
Experience of Companies with Financial Industry-
Specific & Back-Office Services from South Africa
Benefits Sought and Achieved
The benefits achieved by organizations using South Africa
for financial industry- specific services, were stated to be:
• Cultural match with clients and clients’ clients and
ability to be accepted and build relationships
• Ability to handle complex and specialized processing
work that cannot easily be handled out of other highly
standardized offshore processing centers
• Time zone benefits for complex tasks where frequent
communication with the client is required
• Cost reductions compared to onshore delivery of
approximately 45%
• Presence of high-caliber financial services workforce for
non-voice services
• Staff more productive than alternative offshore
locations for complex processing tasks
• Customers more amenable to service delivery from
South Africa than from other offshore locations such
as India
• Accent neutrality & cultural affinity.
As with contact center services, it is apparent that
South Africa is most appropriate for handling complex
financial industry-specific task, often involving a
high level of customer intimacy as part of a global
delivery network for industry-specific services such as
investment administration.
15Skills Availability
& Government Incentives
A. Skills Availability recent years, it remains high relative to As part of a national effort to build
other potential offshore locations, with a on the existing talent base, BPESA,
South Africa has approximately 2Mbps line costing approximately ZAR the BPO industry association in South
5m English speakers with 160,000 300,000 per annum. Africa, are in the process of launching a
graduates per annum emerging from new skills based learning initiative that
its universities. In addition to the BPS Incentives will use game mechanics to educate
scheme, the South African government and assess talent for the industry. The
However, the contact center industry provides financial support for talent initiative is funded by the Rockefeller
in South Africa typically employs development programs, through: Foundation and will be focused on
first-time agents from the high school school leaver talent. The assessment will
population rather than from the • The Monyetia Work Readiness focus on various contact center specific
graduate population, with organizations program, whereby employers lead skills and will be targeted at previously
stating that approximately 1 in 4 consortia to recruit and train entry disadvantaged communities where
applicants are of a suitable standard level staff, and the government youth unemployment is highest.
to become customer service agents. provides approximately ZAR 23,500
The matriculating and non-degree per unemployed person trained.
tertiary pool of personnel consists The scheme is aimed at young B. Government Support &
of approximately 250,000 personnel employed South Africans, focused Incentives for BPO
per annum. on individuals from previously
disadvantaged communities The initial Business Process Services
Overall it is estimated that 410,000 • Sector Education and Training (BPS) incentive scheme was
personnel with potential to work Programs, covering key sectors such implemented in January 2011, since
in the BPO industry enter the as banking, insurance, services, then the South African dti estimates
workforce annually. finance & accounting, and IT, that approximately 9,000 offshoring
whereby employers can claim up jobs have been created. This initial
South Africa also has an established to 75% of levies paid under the scheme has now been replaced by a
body of personnel with accounting and National Skills Fund. revised Business Process Services (BPS)
financial services expertise, including Incentive, effective between October 1,
approximately 36,000 chartered The Monyetia Work Readiness Program 2014 and March 31, 2019.
accountants, 1,260 CFA charter holders, aims to increase the pool of entry-level
and 920 qualified actuaries. employable people, while SETA aims to In order to qualify for the scheme,
accelerate the development of home- applicants need to put forward “projects
In terms of physical infrastructure, grown supervisors and managers. So that meet the strategic objectives
the standard of buildings and roads far, approximately 10,000 learners have of the dti”. In addition, approval of
in cities such as Cape Town are qualified from the Monyetia program applications is subject to the availability
comparable with those in Western with a fourth phase covering 3,000 of funds and compliance with the
Europe. In addition the cost of living learners now underway. relevant provisions of the Public Finance
is relatively low with the cost of living Management Act (PFMA).
in Johannesburg estimated to be 56% In general, organizations, particularly
lower than that in London, Cape Town service providers, using South African The primary objective of the incentive
62% lower than London, and Durban delivery should look to get involved is to create employment in South Africa
67% lower than London. in talent development initiatives through servicing offshore activities.
such as these, both from a corporate The secondary objectives of the
One of the attractions of South Africa, responsibility perspective and also for program include:
and in particular Cape Town, is that access to trained personnel.
it is a location where executives from • Creating youth
the U.K., Europe, and Australia will Services are also available to assist employment opportunities
feel relatively at home culturally, and organizations in testing the viability of • Contributing to the country’s export
where they will be willing to visit, even captive and outsourced international revenue from offshoring services.
for extended periods. Short visits service delivery from South Africa and
are facilitated from the U.K. by the in gaining access to local knowledge, The Business Process Services Incentive
availability of overnight flights in both with, for example, KPMG assisting consists of two components:
directions, so that working time lost organizations in feasibility studies and
due to travel is minimized. establishing shared service center • A base incentive
hubs, EOH offering recruitment • A graduated bonus incentive,
The telecoms infrastructure is now and “learnership” services, and the dependent on the applicant
robust. However, although the cost Rockefeller Foundation providing “work exceeding certain annual offshore
of telecoms has fallen considerably in readiness” support. job creation targets.
16Analysis of South Africa as a BPO Delivery Location
The key eligibility criteria to qualify for in the Government Gazette 11 • The project must employ at least
BPS Incentives are: October 2013 in terms of the 80% youth, defined as people
Codes of Good Practice. This between the ages of 18 and 35
• Be a registered legal entity in South entails applicants: • The project must by the end of
Africa as a going concern and with a − Achieving at least level 6 B-BBEE three years from the start of the
valid tax clearance certificate contributor status or submitting operation, or the expansion, create
• Be involved in starting a new a plan showing how this will be and maintain at least 50 new
operation or expanding an achieved from twelve months offshore jobs in South Africa
existing operation to end of twenty-four months • In a joint venture, at least one of the
• Submitting an application for BPS from the date of incentive parties must be registered as a legal
Incentives prior to the engagement grant approval entity in South Africa.
of qualifying jobs but having already − Achieving level 5 B-BBEE
secured a contract for offshore contributor status from 24-months Assuming the above conditions are
BPS activities to 36-months from the date of met, to qualify for BPS Incentive, a
• Comply with the requirements incentive grant approval project must achieve at least sixty
for Broad Based Black Economic − Achieving level 4 from 36 months percent (60%) against the evaluation
Empowerment (B-BBEE) as issued to end of the incentive period criteria shown in Exhibit V-1.
EXHIBIT V-1
BPS Incentive Qualification: dti Evaluation Criteria
Evaluation Category Parameters measured Sub-
Criteria weights category
(%) weight (%)
Credibility of the 40 Company/Parent Revenues 33
company/parent
Number of years since inception 33
Company/Parent Net Profit (PAT) 33
BPO/Shared 20 Shared services scale or total number of BPO 50
services credentials delivery FTEs globally
Offshore scale of BPO delivery FTEs/shared services 50
Scale of operations 20 SA entity scale 50
in South Africa
Current scale of offshore BPO jobs in SA 50
Soundness of the 20 Contract duration 25
application under
review Revenue of buyer (end-users) 25
Strength of contract (Transition plan, processes, 50
timelines, termination clause)
The project must at least score a minimum of five percent (5%) category weight for
each above-mentioned evaluation criteria.
The base incentive is calculated on projected offshore jobs to be created based on
a tapering scale and is awarded on actual offshore jobs created as per the definition
of full-time equivalents. The base incentive offers a differential (two-tier structure)
incentive for non-complex jobs and complex jobs, based on a fully loaded operating
cost per job and is paid for a period of five years (60 months) from the date at which
offshore jobs are created.
The base incentive will be determined at application stage depending on the fully
loaded operating costs.
17The base incentives for non-complex jobs and for complex jobs are as follows:
Non-complex Jobs
R 124 000*
R 112 000*
R 108 000*
R 100 000*
R 92 000*
Number of 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23
offshore
jobs
Up to 400 R 32 000 R 24 000 R 24 000 R 24 000 R 20 000 R 20 000 R 20 000 R 16 000 R 16 000
Complex Jobs
R 184 000*
R 176 000*
R 160 000*
R 144 000*
R 136 000*
Number of 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23
offshore
jobs
Up to 200 R 40 000 R 40 000 R 40 000 R 32 000 R 32 000 R 32 000 R 24 000 R 24 000 R 24 000
* Total grant per job created and maintained over 5 years
“Non-complex jobs” are jobs where the fully loaded operating cost is less than
or equal to R300 000 per annum with wages contributing at least 65% of the
operating cost base for a steady state of operation.
“Complex jobs” are jobs where the fully loaded operating cost is greater than
R300 000 per annum per job with wages contributing at least 65% of the operating
cost base for a steady state of operation.
18Analysis of South Africa as a BPO Delivery Location
The bonus incentive is paid at the end of year five.
The bonus incentive for non-complex jobs is available to applicants that create and
maintain more than 400 offshore jobs over a 5-year period and it is structured into
the two components shown in Exhibit V-2.
EXHIBIT V-2
BPS Incentive Bonus Scheme: Non-Complex Jobs
Number of Bonus Incentive Illustration
offshore jobs
Greater than 400 but less than 20% once-off Bonus calculated for each job created and
or equal to 800 maintained between 401 and 800
Illustration: If an investor creates 420 actual
offshore jobs in 2014/15, 430 jobs in 2015/16,
440 jobs in 2016/17, 450 jobs in 2017/18 and 460
jobs in 2018/19. Given that an investor created
and maintain more than 400 jobs over a five year
period, the bonus incentive amount at the end of
the fifth year (2018/19) is calculated as follows:
• Bonus: R 32,000*20%*20 = R 128,000
Greater than 800 30% once-off bonus Bonus calculated for each job created and
maintained in excess of 800
Illustration: If an investor creates 850 actual
offshore jobs in 2014/15, 865 jobs in 2015/16,
875 jobs in 2016/17, 880 jobs in 2017/18 and 900
jobs in 2018/19. Given that an investor created
and maintain more than 800 jobs over a five year
period, the bonus incentive amount at the end of
the fifth year (2018/19) is calculated as:
• Bonus: R 32,000*30%*50 = R 480,000
Source: the dti
19The bonus incentive for complex jobs is available to applicants that create and
maintain more than 200 offshore jobs and it is structured into the two components
shown in Exhibit 3.
EXHIBIT V-3
BPS Incentive Bonus Scheme: Complex Jobs
Number of Bonus Incentive Illustration
offshore jobs
Greater than 200 but less 20% once-off Bonus calculated for each job created and maintained
than or equal to 400 between 201 and 400
Illustration: If an investor creates 220 actual offshore jobs
in 2014/15, 230 jobs in 2015/16, 240 jobs in 2016/17, 250
jobs in 2017/18 and 260 jobs in 2018/19. Given that an
investor created and maintain more than 200 jobs over a
five year period, the bonus incentive amount at the end of
the fifth year (2018/19) is calculated as:
• Bonus: R 40,000*20%*20 = R160,000
Greater than 400 30% once-off bonus Bonus calculated for each job created and maintained in
excess of 400
Illustration: If an investor creates 450 actual offshore jobs
in 2014/15, 465 jobs in 2015/16, 475 jobs in 2016/17, 480
jobs in 2017/18 and 500 jobs in 2018/19. Given that an
investor created and maintain more than 400 jobs over a
five year period, the bonus incentive amount for the fifth
year (2018/19) is calculated as:
• Bonus: R 40,000*30%*50 = R 600,000
Source: the dti
20Analysis of South Africa as a BPO Delivery Location
The potentially challenging element in directly accessing the BPS Incentive
program for International organizations looking to establish own operations, or
captives, is the necessity to achieve B-BBEE Contributor status.
The award of points within the scorecard is shown in Exhibit V-4.
EXHIBIT V-4
B-BBEE Generic Scorecard
Element Weighting (points)
Ownership 25
Management Control 15
Skills Development 20
Enterprise & Supplier Development 40
Socio-Economic Development 5
This requires organizations to achieve:
• B-BBEE Level 6 contributor status within 12- 24months (>=70 points)
• B-BBEE Level 5 contributor status from end 24-months to 36-months
(>= 75 points)
• B-BBEE Level 4 contributor status from end 36-months to end of
incentive period (>= 80 points)
2122
Analysis of South Africa as a BPO Delivery Location
Companies Delivering Services
from South Africa
Contact Center Services
A. Aegis
Aegis currently employs approximately 1,300 FTEs in of the client takes three weeks covering all soft skills,
South Africa: 3/4 in Johannesburg and 1/4 in Durban, and systems, sales skills, and product knowledge.
is expecting to add a further 250 people across these 2
locations shortly. Aegis supports pay-as-you go energy customer service for
the UK based energy & home services company, covering
In addition, Aegis is potentially looking to add Port all inbound customer service queries around billing, meter
Elizabeth as a delivery location in 2015. issues and outages. The service is delivered via 230 FTEs
based in Johannesburg. South Africa was again selected on
The current breakdown of Aegis’ activity in South Africa the basis of service quality and cultural affinity.
is 70:30 (domestic to international). All “international”
activity is currently in support of U.K.-based organizations, The training for agents to support the client takes 6-7
but Aegis South Africa is increasingly targeting the weeks, due to the complexity of the pay-as-you-go product.
Australian market. This included training with the temperature turned down to
provide an appreciation for agents of U.K. temperatures.
Aegis currently has two “international” clients, namely a
leader in legal and business research and a U.K. based In terms of benefits, Aegis has recently achieved a score of
energy and home services company. 7.9 against a target of 7.6 on this organization’s client loyalty
barometer, which is a composite measure of customer
In both cases the major reasons for choosing South Africa satisfaction. In terms of NPS, Aegis has delivered above
were the combination of high cultural affinity and cost- target for the past six months on this account.
effectiveness. The high cultural affinity is perceived by Aegis
to lead to a high quality of service resulting in a high first Overall Aegis services from South Africa are 85% inbound
call resolution rate. and 15% outbound, the latter in support of customer
retention and outbound sales. The majority of the outbound
In particular, Aegis provides outbound sales calls in activity carried out by Aegis from South Africa is in support
support of renewals and up-/cross-selling of a client’s legal of the domestic market. In addition, Aegis is looking to get
publications subscription business. In its last campaign of into early stage collections.
this type for this organization, Aegis achieved a conversion
rate that was 19% higher than target. The cost differential By industry sector, approximately 60% of Aegis’ South
relative to providing these services from the U.K. was African services are in support of the financial services
approximately 30%-35%. and telecoms sectors, with a further 20% of activity in
support of the utilities sector. Beyond these sectors, Aegis
Aegis estimates that it recruits approximately 1 in 8 of has a number of clients in the leisure/travel sector, plus a
candidates interviewed and the training program in support government contract, and a lottery contract.
23B. Amazon “Amazon is satisfied with the operational and business
results obtained by its Cape Town based operations.”
The business challenges faced by Amazon and hence
the need for offshoring: Your plans to expand current service delivery from
South Africa
“Amazon’s mission is to be the most customer centric
company on earth, providing our customers with low prices, “Yes, Amazon is expanding its foot print in South Africa and
broad selection and fast delivery. This requires that Amazon has launched 2 new operations in Cape Town over the last
is able to provide services on a 24/7 basis. Geographic 18 months.”
locations such as Cape Town provide the infrastructure and
ability to enable this service.”
C. Barclays Africa Group Limited
The services being offshored and why this portfolio of
services was chosen for delivery from South Africa: “Like many of the major financial institutions, Barclays
established their shared services operations in India in the
“Amazon has had a development center in Cape Town mid-2000s which has now grown to a business of 9,000
since 2005. We opened the development center in Cape employees. As a bank they had to de-risk the business by
Town to tap into the great local talent available in this area, finding alternative locations.
and more generally in South Africa. The Center has played,
and continues to play, an instrumental role as a contributor South Africa is regarded as a strategic location for Barclays
to the worldwide Amazon Web Services group, and in as Barclays Africa Group Ltd (BAGL, inclusive of Absa) forms
particular in building and operating the Amazon Elastic almost a third of Barclays PLC. Barclays Shared Services
Compute Cloud. Amazon Web Services allow software Africa was established in 2012 with the aim of supporting
developers anywhere in the world to make use of Amazon’s the 12 African countries in terms of infrastructure, talent
world class global infrastructure under a simple, cost- development and business expansion. South Africa was an
effective pay-for-what-you-use model. The services get rid easy choice for Barclays due to the availability of English
of the muck, allowing our customers to focus on innovating neutral language capability, financial services skills, political
and differentiating themselves. stability, and the existing infrastructure.
Customer Services: We took our first customer service To date, Barclays Shared Services Africa has hubs in the
call into Cape Town in October 2010 and today we have following cities:
1,000 employees working with us to provide support to
Amazon customers around the world. The employees at • Pretoria: 3,300 seats
our Cape Town customer service center are an important • Johannesburg: 3,000 seats
part of that team. Twenty-four hours a day, this team works • Cape Town: 1,000 seats
hard to provide German, English and 7 other languages • Kempton Park: 700 seats
support for Amazon customers, as well as support for our
Digital customers.” This footprint combines the two largest shared services
hubs in South Africa with an ‘active-active’ capability for
Amazon’s location selection criteria and how South business continuity. The Pretoria campus which is the
Africa met these criteria: largest hub is well located and close to the university and
various educational institutions. Its proximity to a large
“Cape Town has the infrastructure, telecoms and pool of talent provides a definite advantage, and employee
technologies, cost advantages, English language skills as benefits include an open environment, health and wellness
well as being well positioned time zone wise to be able to facilities. The scale of the operation further provides
provide a 24/7 service experience.” opportunities for vertical and lateral career development.
The benefits that Amazon was seeking from South African The following services are at present delivered by the
delivery and the actual profile of benefits delivered shared services hubs:
“Amazon has been able to service its customers, as • Customer contact operations, including all call center
planned via the Cape Town operation.” activities, both voice and multi-channel, across customer
service, and sales
Your satisfaction with delivery from South Africa, overall • Business processing, covering all high volume middle
and with skills availability, infrastructure, incentives, and and back office processes such as account opening,
delivery cost structure account maintenance and document management
24Analysis of South Africa as a BPO Delivery Location
• Specialist services, covering for example verification of telecoms sector and including recruitment and compliance
customer details and anti-money laundering, along with for a nursing sector client.
emerging activity in legal process outsourcing
• Credit collections and recoveries. The breakdown of Capita’s South African delivery by service
type is approximately:
Apart from supporting Absa in South Africa, Barclays Shared
Services Africa performs the following functions in support • Customer service 80%
of the broader Africa region: • Collections 15%
• Back-office 5%.
• Business processing support for seven countries
including Zambia, Ghana, Botswana, Tanzania, Capita SA currently services O2 with approximately 1,000
and Uganda FTEs. The service started initially with a “proof-of-concept”
• 24/7 contact center support for Zambia and Zimbabwe for O2 with 170 agents providing customer service in
• Processing services including payment processing in support of pay-monthly customers and has now grown to
support of Mauritius and the Seychelles cover three O2 businesses: pay monthly, pay-as-you-go,
• Collections in support of Zambia and Botswana and SMB.
Most of the work currently done out of South Africa is These businesses are supported across a diverse range of
conducted in English, as this is the primary business customer service queries from upgrades to problem solving
language, however work is underway to expand the to billing queries, and assisting customers in selecting more
language services to the Africa regions, for example Swahili. appropriate or affordable packages. Capita supports two
shifts with the later shift ending around 11pm, and also
The benefits achieved by the scale of Barclays Africa provides support for Saturdays and Sundays.
Shared Services operation include an improved customer
satisfaction rating by 24% year on year, multi skilling of All customer service delivery is currently voice, but Capita
staff, and the ability to absorb 23% more volume without expects to introduce web chat from South Africa for several
increasing the number of people. The biggest challenge clients in the near future.
faced by Barclays is the absence of a 24/7 culture in
South Africa. First call resolution is an important metric within the
contract and here South African FCR rates are equal to or
Barclays is expanding its shared services capabilities from higher than those delivered from the UK with South African
high-volume rules based activities to also include lower- delivery matching that from the UK in terms of CSAT.
volume and complex processes. From a cost perspective,
the differential relative to other offshore destinations has The initial move of elements of customer service delivery
reduced considerably over the past two years. Barclays to South Africa was driven by Capita with one condition
also participates in the dti incentive scheme to enhance being that the move would not lead to adverse impact on
employability in South Africa and to develop more offshore the O2 brand. Speed-to-competence was an important
job opportunities.” criterion with the initial target of 6-months being achieved
in 3-months.
D. Capita In addition to high FCR rates, South African delivery has
achieved cost savings relative to the UK of approximately
Capita has been present in South Africa for more than 2 40%-45%.
years and currently employs approximately 1,500 personnel
across two sites in Cape Town. The company supports seven Back-office work being carried out for telecoms operators
clients using South African delivery, with a strong presence by Capita from South Africa includes document indexing
in supporting the telecoms sector. and distribution.
Capita South Africa has added to Capita’s existing In terms of recruitment, Capita is targeting personnel with
capability with their presence in the BPO sector providing experience of customer service in the hospitality, retail,
customer service with fully hosted contact center solutions and nursing sectors. Induction and initial training takes
trusted by global leading ‘brands’ to transform their 4 weeks with agents then going into an environment
customer experience. which involves calling for part of the day combined with
further training for up to a month – additional quality and
In addition to customer management services, Capita SA leadership support provided outside of the training and
also provides back-office services both in support of the development environment.
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