The Global Business Services (GBS) industry in South Africa experienced about a 25 percent Compound Annual Growth Rate (CAGR) from 2015 through 2019 – that’s three times the global average. Business process services, especially for English language voice-based delivery, has been the strongest foothold for the country, driven by growing availability of a large, accent-neutral, and empathic workforce, government support with improved access, and enhanced enabling infrastructure. Now, the country is fast emerging as an attractive location for Information and Communication Technology (ICT) services delivery, a segment that today comprises about one-fifth of the total global services market in South Africa.
So, what’s propelling South Africa’s appeal as a destination of choice for all kinds of IT services?
The digital value proposition
South Africa has kept pace with increasing global demand for digitalization and offers capabilities for next-generation services including testing, data services, analytics, and end-user support. The growth rate for next-generation technologies, such as AI, blockchain, machine learning, and IoT, is almost double that of the country’s ICT sector. The country consecutively ranked among the top 20 digital nations in the Tholons Globalization Index in 2018 and 2019, and secured the fourth highest innovation/digital score globally in 2019. Within the continent, it is the leading destination in terms of technological readiness for a digital revolution, and it was ranked among the top five for AI readiness by the Government AI Readiness Index 2019.
The talent value proposition
South Africa has a sizable pool of technically skilled and trainable English-speaking talent, with a more neutral accent than offshore geographies such as India and the Philippines. And because of lower infrastructure costs, GBS-focused government incentives, and relatively low attrition rates, the country offers cost arbitrage rates for ICT delivery that are 25-35 percent less than in competing central and eastern European (CEE) locations, and 50-60 percent less than tier-2 locations in the UK.
The government support value proposition
In the past couple of years, the government has proactively rolled out various incentive plans and policies to develop ICT capabilities for domestic and global companies. Programs including GBS incentives, employment tax incentives, the Export Marketing and Investment Assistance (EMIA) scheme, and the Sector Specific Assistance Scheme (SSAS) are aimed at creating employment by servicing offshore activities and contributing to the country’s export revenue from offshoring services.
The central and provincial governments have also made concerted efforts to build more complex IT skills through industry-academia collaboration and training programs such as Digital Innovation Precinct and ImpaCT, which provide training and education for software engineering, game development, data science, and other digital skills. Cloud engineering, cyber security, data services, and analytics are among the top investment areas for the government’s 2030 Green Target Plan to develop digital/ICT outsourcing capabilities in South Africa.
With all this, it’s no surprise that the country is experiencing increasing demand for IT services across industries, including healthcare, BFSI, and telecom. The country is home to a fast-growing cluster of companies providing website architecture and development, application and platform development, big data analytics, RPA, and cybersecurity solutions. Currently, South Africa houses two Azure datacenters by Microsoft and one by Huawei, and Amazon has plans to open a data center in 2020. South Africa’s thriving start-up community further supports innovation and advances in emerging fields such as Fintech, EdTech, InsurTech, and HealthTech.
While contact center continues to be the mainstay of the South African GBS industry with almost three-quarters of the total headcount, the country’s capabilities in other functions, including ICT, are growing quickly. To learn more about South Africa’s attractiveness as an ICT delivery destination, please contact H Karthik, Parul Jain, or Ratandeep Burman.