Business Process Outsourcing to South Africa
South Africa at a glance
•Area 1,219, 090 km2
•Population 47,9m (2006 estimates)
•Currency R1 = 100 cents
•Time GMT + 2 hrs
•Head of the State: President Thabo M Mbeki
•11 Official languages with English the business language
•Total GDP: 2007 US$ 259 864 m
•GDP 2007 per capita: US$ 13 564 at PPP
•Real GDP Growth: 5,0 (2007)
•Inflation : 6.4% (annual 2007 average)
•Corporate Tax rate : 28%
•Exports: Tourism, minerals, diamonds, metals and
metal products, food products & automotive components.
•Main trading partners: Germany, USA, China, Japan &
the UK.
Achieving sustained and balanced growth
Economic
advantages
which create a
positive
environment
A tested and
reliable legal
system
Cheap
electricity
Abundant
mineral & natural
resources
Established
industrial &
financial
infrastructure
A relatively large
labour force
Further, ‘[c]onsistently prudent macroeconomic policies
have succeeded in reducing the fiscal deficit, stabilising
debt levels, and lowering inflation and interest rates’; and
the country ‘stands out among its peers due to its
democratic and transparent institutions and entrenched
Standard and Poor’s, August 2005
political stability…’
EXPANDED GOVERNMENT ASSISTANCE AND SUPPORT
SOUTH AFRICA’S GOVERNMENT HAS PRIORITISED THE BPO SECTOR
“… we will be responding to the skills we require for … the
priority sectors - tourism and business process
outsourcing in particular”
Phumzile Mlambo-Ngcuka, Deputy President of South Africa and
Chair of the Accelerated and Shared Growth Initiative for South
Africa
Source: Media, team analysis
3
BPO2SA
Value Offshoring
South Africa’s Value Proposition for BPO&O
GDP sources (2007E)
Interesting Facts
•South Africa is 6 hours closer to the USA than
Total Services
70%
Tourism Services
8%
Financial Services
20%
Industry/manufact
uring
25%
Agriculture
2.5%
is the Philippines
•South Africa has roughly 80,000 call centre
seats.
•English is the language of business and
education. There are ~9 million citizens that
speak English as their first language.
Age Profile Stats (2006)***
Employed 16-65 yrs
42%
15-24 years old
21%
25-49 years old
27%
50+ years old
14%
Background: South Africa’s Window of Opportunity
• The South African Government has demonstrated its strong commitment to BPO in
South Africa.
• The government has set aside a dedicated fund over the next 5 years ( 2007 – 2011)
for investors in the country’s BPO sector.
• The fund has been created under the Government Assistance and Support (GAS)
programme launched in March 2007.
• The objective of the incentives is to create employment opportunities.
Our Strategy for the BPO&O Sector
• Strategic focus areas identified:
– Government Assistance and Support (GAS)
– Talent development
– Marketing
– Industry mobilisation
– BPO&O standards
• Additional work streams have been identified :
– Telecommunications pricing packages for the BPO&O sector
– BPO 2nd economy strategy
– BPO infrastructure or BPO Parks or Special Economic Zones
SOUTH AFRICA HAS A SIZEABLE, EDUCATED AND RAPIDLY GROWING
WORKFORCE…
Economically active population
%, 2005
Current educated workforce
million
100% = 16m
Unemployed
School
leavers
25%
6
75%
Graduates
South Africa has a readily available
labour workforce of
~4m
2
The pool of
available,
educated labour
is growing
rapidly and is
readily available
“The labour market is
extremely growth enabling”
Bev Cunningham, HR Manager,
CSC
Source: Statistics SA Labour Force Survey, 2005, Statistics SA Census 2001, Department of Education, team analysis
7
SA’s SCHOOL SYSTEM ALSO DELIVERS OVER 300,000
LEAVERS TO THE LABOUR FORCE EACH YEAR
SCHOOL
School leavers each year
000
Gauteng
47
51
56
55
59
2001
2002
2003
2004
2001
Western Cape
31
National school leavers annually
000
KwaZulu Natal
33
69
75
82
~50% of school leavers proceed to tertiary
institutions or are formally employed,
resulting in over 150 000 entering the labour
market each year
2002
2003
2004
331
322
Eastern Cape
33
33
29
33
38
34
306
2001
2002
2003
2001
2004
2002
Other Provinces
(NW, NC, MP, FS, LP)
111
120
121
2003
2004
277
127
2001
2001
2002
2003
Source: Labour Force Survey, team analysis
2002
2003
2004
2004
8
….SUPPLIED WITH OVER 100,000 GRADUATES EACH YEAR FROM A
WORLD CLASS EDUCATION SYSTEM
Directly relevant
to BPO
Annual graduates
000
The University of Witwatersrand
• Business School ranked 45th in Financial Times
Executive Education rankings
• 87 Rhodes scholars
• 4 Nobel Prize winners
Business and
Commerce
93
The University of Cape Town
• Exchange programmes with 16 leading US and UK
universities
• 18 scientists rated as 'world leaders' in their fields
• 3 Nobel Prize winners
29%
Other*
99
71%
102
107
39
33
37
64
66
65
68
2000
2001
2002
2003
29
Almost 40,000 students graduate each year
from courses directly relevant to BPO
* Includes mathematical sciences, computer science and engineering
Source:Department of Education, Statistics South Africa, team analysis
9
TRAINING PROGRAMS ARE BEING PUT IN PLACE TO ENSURE SCHOOL
LEAVERS ARE SUITABLY QUALIFIED…
Government and industry’s talent development
programme, aimed at training 30 000 learners, is being
developed . . .
Talent development programme
Objective
• Increase the pool of entry-level employable
people by using a targeted customised
skills training programme aimed at 30 000
young, unemployed South African’s
• Accelerate the development of homegrown
supervisors and managers
• Ensure the ongoing capacity building of a
globally competitive talent pool with the
required skills at all levels of employment
Targets
An innovative government funded,
employer led, learner focused,
recruiter and trainer supported
training programme has
been developed
• Train 1 000 entry level learners in 2007
• Train an additional 29 000 learners for the
Employer
Recruiter
Trainer
Learner
period 2007-2010.
Source: Team analysis
10
…AND GOVERNMENT HAS COMMITTED TO FURTHER IMPROVING THE
DEPTH AND QUALITY OF SA’S TALENT POOL
Overarching government objectives
Initiatives in place
• Develop and improve the skills of the broader
• The Skills Development Act provides a framework for the
South African workforce
• Reduce unemployment in the country
•
through increased economic growth
• Empower previously disadvantaged South
Africans, both economically and socially
• Encourage greater investments in training
• Create opportunities for the introduction of
new advanced skills
•
development of South Africa’s skills base, including the creation of
a National Skills Fund to provide for skills development initiatives
The Skills Support Programme offers incentives with a value of up
to $840 000 for a 1 000 seat centre over 5 yrs. The programme
provides:
– Training grants for eligible training costs
– Learning development grants for developing customised training
programmes
– Capital grants for installation of training capacity
A wage incentive programme for learnerships, available for
employers offering approved learnership programmes. Provides up
to $430 000 over 5 yrs for a large centre
investors could take advantage of a
range of support that is available to
investors to enable job creation and skills
development
Source: Team analysis
11
SA RECOGNISES DATA PRIVACY AND THE PROTECTION OF
INTELLECTUAL PROPERTY…
• The Protection of Personal Information Bill
covering Data Privacy is close to being promulgated
and is very similar to the EU Data Protection Directive
• The promulgation of information protection legislation
in South Africa will necessarily result in amendments
to other South African legislation, most notably the
Promotion of Access to Information Act 2 of 2000,
the Electronic Communications and Transactions
Act 25 of 2002 and the National Credit Bill [B182005]. All these Acts contain interim provisions
regarding information protection in South Africa
• The Intellectual Property Laws Amendment Act –
aligns SA with the Agreement on Trade Related
Aspects of Intellectual Property Rights ("TRIPS")
• Patents Act 1978. South Africa is a subscriber to the
Patent Co-operation Treaty ("PCT") which facilitates
simultaneous protection in a large number of
countries
• Trade Marks Act 1993 - contains legislation similar to
the new legislation in the United Kingdom and other
European community countries
Sources: Deneys Reitz Attorneys, SA Law Commission
• Copyright Act 1978 - legislative amendments have
extended the scope of copyright in computer
programmes. International protection follows from
South Africa's membership of the Berne Convention
• Designs Act 1993 - designs relating to integrated
circuits can now be registered
• Counterfeit Goods Act 1997 - enables proprietors
of certain intellectual property to act against
counterfeiting of their products. The Act provides
streamlined and effective enforcement measures
• Intellectual property law is also affected by other
legislation including:
•
•
•
•
•
•
•
•
•
Merchandise Mark Act
Harmful Business Practices Act
Competition Act
Business Names Act
Standards Act
Marketing Act
Companies Act
The Intellectual Property Laws Rationalisation
Trade Practices Act
12
…AND A NUMBER OF LEGAL INSTRUMENTS REGULATE FINANCIAL
SERVICES IN SOUTH AFRICA
• The Financial Services Board (FSB) oversees the regulation of financial
FSB
markets and institutions, including insurers, fund managers and broking
operations but excluding banks, which fall under the South African
Reserve Bank. The FSB is the equivalent of the FSA in the UK
• The Financial Intelligence Centres Act (FICA) – counteracts money
FICA
FAIS
laundering
• Compliance with the Financial Advisory and Intermediary Services
(FAIS) Act is required for all providers of financial services. Agents
must also be registered, trained and certified
• As general best practise, banks are compliant with BASEL II
BANKS
Source: Team analysis
• Banks are regulated by The Banks Act, which is primarily based on
similar legislation in the United Kingdom, Australia and Canada. The
Banking Council looks after consumer issues and there is an
Ombudsman. The National Payment System Act of 1998 was
introduced to bring the South African financial settlement system in line
with international practice on settlement systems and systematic risk
management procedures
13
SA HAS RECENTLY LAUNCHED BPO SPECIFIC INCENTIVES…
SA Rand (R) : US dollar exchange rate ~ 7 : 1
National Incentive
Investment Incentive Grant
Training and Skills Support
Grant
Comments
Value
The incentives are offered to
local and foreign investors
establishing projects that aim
primarily to serve offshore
clients. The objective of the
incentives is to attract BPO
investment that creates
employment opportunities
From
$5300
[R37,000]
To
$8500
[R60,000]
per seat
Dependent on the level of
qualifying investment expenditure
and employment creation.
The Grant supports companyspecific training
requirements including:
• in-house trainer/
facilitator/assessor
development/ skills
• costs for development of
learning materials/
programmes
• costs for trainer
secondment into South
Africa
• costs of purchasing and
installing training
equipment and facilities
Up to
$1700
[R12 000]
per agent
Grant per new employee trained,
calculated as 50% of qualifying
training expenditure
Minimum jobs = 200 and 90% of
revenue must be derived offshore
Note: The BPO Investment Incentives are effective from 06 December 2006 up to 31 March 2011
Source: The Department of Trade and Industry South Africa March 15, 2007
14
… DETAILS OF THE INVESTMENT INCENTIVE GRANT
SA Rand (R) : US dollar exchange rate ~ 7 : 1
Employment Created
Qualifying Investment Costs Per
Seat
Grant Per Seat
200 – 499
At least $10 500 [R74,000]
$5300 [R37,000 ]– $6400 [R44,600]
500 <
Greater than $12 700 [R89,200]
$6400 [R44,601] – $8500 [R60,000]
200 <
Less than$10 500 [ R74,000]
Between $5300 [R37,000] and $7400 [R52,300]; or
50% of agents salary costs for 2yrs, whichever is
lesser
• A project employing between 200 – 499 agents with Qualifying Investment Expenditure of more than R74,000 per seat is
eligible for a grant between R37,000 and R44, 600 per seat.
• A project employing 500 or more agents with Qualifying Investment Expenditure greater than R89,200 per seat is eligible for a
grant between R44,601 and R60,000 per seat.
• Should a project have qualifying investment expenditure of less than R74,000 per seat, but 200 or more agents, it will be
eligible for a grant between R37,000 and R52,500 per seat. The approved grant may not exceed 50% of the salary costs of
agents for the first 2 years of the project.
Source: The Department of Trade and Industry South Africa March 15, 2007
DISBURSEMENT OF INVESTMENT GRANT
The approved grant will be disbursed in 4 stages, over 3 financial years of the company,
subject to performance criteria:
Claims
Period
Percentage
1
6 months
25%
2
Year 1
25%
3
Year 2
25%
4
Year 3
25%
IN ADDITION INVESTORS CAN ACCESS OTHER INCENTIVES
SA Rand (R) : US Dollar exchange rate ~ 7 : 1
General Incentives
Comments
Technology and Human Resource
for Industry Programme (THRIP)
The aim is to build R & D capacity
Urban Renewal Programme
The aim is to encourage the
development of businesses in urban
renewal areas
National Learnership Programme
The aim is to develop a pool of
nationally accredited agents,
supervisors and managers
Location in Industrial
Development Zones (IDZ)
There are 3 IDZ’s in South Africa
Value
$1 for every $2
put in
Matching grant to support costs incurred in
R & D that enhances skills
Accelerated depreciation allowance on the
capital value of buildings and improvements
in Urban Development zones
$8500
[R60,000]
Tax deduction per unemployed person at the
start of and on certification of a registered
Learnership (split into 2 amounts, before
and after)
$5700
[R40,000]
Tax deduction per employed person at the
start of and on certification of a registered
Learnership (split into 2 amounts, before
and after)
Various
• Grant to cover 50% of the cost of
•
Regional Programmes
Each region offers individual investors
options; typically reduced facility costs
Various
• In the Western Cape: 100% rates rebate,
•
Source: The Department of Trade and Industry
developing innovative products and
processes
Exemption from Value Added Tax (VAT)
on imported goods and a rebate on duty
on imported goods
free land and buildings, subject to
availability
Gauteng: Highly reduced rental space
17
THE DEPARTMENT OF TRADE AND INDUSTRY (THE DTI) IS WILLING TO
ASSIST INVESTORS IN SETTING UP A BPO CENTRE IN SA
Government is willing to facilitate…
• Fulfilment of regulatory requirements
• Required information relating to
– Information on all regulatory requirements
– Progress tracking on different applications
– National data, e.g., telecoms, connectivity,
transport
– SA BPO landscape
– More detailed regional information e.g.
average salaries, rental costs, amenities etc.
• Access to Incentives programmes
– Information on which incentives are
available
– Assistance in applications for incentive
programmes
– Progress tracking and feedback on
incentives applications
Government
Support Offered to
investors
• Assistance for investors in setting up
site visits with
– Vendors
– HR agencies
– BPO centres
• Assistance in identifying a location for a BPO
• Acquisition of work permits
– Information on work permit requirements
– Assistance in applications for work permits
– Progress tracking and feedback work
permit on applications
centre
– Identify available space
– Consider required amenities
• Support in planning further
investments/ramp up of existing investment
Source: Team analysis
18
THE INDUSTRY IS SUPPORTED BY A NATIONAL PARTNERSHIP
OF GOVERNMENT AND THE PRIVATE SECTOR
FOR FURTHER INFORMATION CONTACT:
Dr Ray Ngcobo, Chief Director: Strategic Competitiveness, Enterprise and Industry Development Division, the dti
Tel: +27 12 394 1372 . Mobile: +27 82 783 5888 . E-mail: raymondn@thedti.gov.za
Mr Mfanu Mfayela, Chief Executive, BPeSA
Tel: +27 861 722 2266 . Mobile: +27 84 722 2266 . E-mail: mfanu@bpesa.org.za
Source: SSF Team Analysis
BPO2SA
Value Offshoring
Thank You !!!