South Africa BPO proposition

In collaboration with

What you will learn in this workshop

Sonia Galat,CEO & Co-founder Africa Business Venture

What is your experience in Africa?

• Specifics of South Africa • South Africa value proposition• How to leverage South Africa?

Specifics of South Africa

High infrastructures and quality of life

Excellent quality of infrastructure – roads, power, connectivity, retail and office buildings

Good quality of life with high standard of education, entertainment and healthcare facilities, very similar to those in the UK, US, Australia

Low cost of living: Johannesburg is ranked at 131 and Cape Town at 200 out of 214 cities on the worldwide cost of living index1 (Mercer 2015) (less than Prague, Dublin, Delhi, Kuala Lumpur and Cairo)

Compatible time zone with UK (GMT+2), US-6-8 hours, Australia -6-8 hours

Ease of access with more than 40 direct flights between UK, London Heathrow and South Africa, direct flights to Atlanta, New York, Washington in the US, Sydney and Perth Australia, Mumbai India

1 Lower the rank, lesser is the cost of living. (Rank 1 would be the most expensive city)

“Reliability and redundancies were issues of the past. The quality of service has now improved a great deal. My costs have reduced by 50%.”– BPO Executive in-charge of SA operations

Robust enabling environment

Number of undersea cables has doubled in the last three years with three more high capacity cables due to be active in the near future

Reduction in telecom costs by 90% since 2003. ~50% drop since 2008

100% SLA being provided on telecom contracts

Telecom providers providing end to end solutions from Europe, the Americas, Asia to any SA location

Source: Telecommunication service providers, Africa Undersea Cables research

Stable telecom infrastructure with steady addition in undersea cables and rapidly reducing costs

TELECOM CONNECTIVITY

Central & Eastern Europe

South Africa

PhilippinesIndia

Key destination for U.S. market

Multi-lingual delivery for Europe

Focus on Spanish, Portuguese language work

Global BPO hub

Central and Latin

America

South Africa (Durban, Cape Town, Johannesburg)

emerging as a hub to serve English speaking markets

While establishing

global delivery models, firms are looking to

expand beyond India and

Philippines

GLOBAL DELIVERY MODEL

South Africa value proposition

SOUTH AFRICA VALUE PROPOSITION

3. Significant cost savings

4. First World experience

5. Robust enabling environment

Deep domain skills

1. Skilled, English-speaking talent pool

Large scale English language talent pool with neutral accent

Distinctive strength in driving superior customer experience

Cultural affinity with UK,US, Australia

Costs 50–60% lower than source markets

Market-leading incentives that reduce costs by 20%

Narrowing cost differential with low-cost locations

First World infrastructure Superior quality of life for

expats. Time zone similarities and ease

of access or “follow the sun”

Mature domestic market World-class strengths in

financial services and legal domains

Large experienced pool

1

2 3

45 Attractive investment climate and

strong public sector support Robust and expanding

telecommunications infrastructure

Political and socio-economic stability

India

Philippines

South Africa

Malaysia

Egypt

Kenya

Sri Lanka

Northern Ireland

South Africa is among the Top 3

global locations that can support English language skills at

scale

Note: Represents qualified talent with good English language proficiencySource: Everest Group Research (2012)

Annual supply of fresh talent for English language BPO2011; ‘000s

370,000 BPO industry addressable workforce added annually across educational streams

~3.6 million English speakers

4,400

450

370

160

70

30

20

12

ENGLISH SPEAKING TALENT POOL

Western Cape100% = 65,000

Rest of South Africa

Distribution of Bachelor’s and Honors Graduates

Western Cape

Rest of South Africa

Science, Engineering and Technology

Distribution of Masters and Doctoral Graduates

Tertiary graduate profile mix in the Western Cape

100% = 9,500

43%

23%

7%

27%

Key education facts:

South Africa produced 403,874 successful matriculants in 2014 (closest UK equivalent to A-levels)

The first Master of Business

Administration (MBA) progamme outside of the USA was started by the University of Pretoria in 1949

The University of Cape Town Graduate School of Business consistently achieves a Global Top 100 ranking in the Financial Times rankings survey

GIBS Gordon Institute of Business, Johannesburg) was ranked as the top MBA in Africa by the Financial Times in 2014.

Business and Management

Humanities and Social Sciences

Education

25%

75%

Source: Department of Basic Education, Southafrica.info

18%

82%

HIGHLY EDUCATED POOL RESOURCE

KEY DRIVERS OF SA’S DOMAIN ADVANTAGE

Mature domestic market

Developed education system

Generates a large number of qualified personnel in specialist areas (e.g. actuarial, investment management)

Sector-specific training programs (e.g. banking, insurance)

• Large domestic industry: >US$250 billion banking assets• Skilled talent pool experienced in working with complex

products

• Strong IP in large scale back-offices (>230,000 employees)

• Ranked highly by World Economic Forum1 on multiple business and financial health indices:

• #1 rank (Best performing country) - Strength of Auditing and Reporting Standards

• #1 rank (Best performing country) – Regulation of securities exchange

• #3 rank – Financing through local equity market • #3 rank – Efficacy of corporate boards • #6 rank – Soundness of banks• #7 rank - Financial markets development

World Economic Forum’s The Financial Development Report (2014-2015) assessing 144 of the world’s leading financial systems and capital markets.

Source: World economic forum

Similarities with Western standards

Similar data protection laws (to European Union), products and certifications allow easy transition and stabilisation of operations

Professional qualifications (e.g. actuarial, legal) similar to the UK, reciprocity agreements

especially for Financial Services

How to leverage South Africa?

Main business process services outsourced to South Africa

LPO for large firms

Actuarial modeling, pricing

Offshore fund administration

Healthcare eligibility services

Niche, non-voice BPO

2 Location of choice to offshore complex, judgment oriented processes in key domains to deliver higher business value

Sales and delivery base for Rest of Africa

Shared services hubRegional shared

services hub

3 Platform to provide global shared services especially for the sub-Saharan African region

Customer contact services involving complex interactions such as upselling, retention

Multi-channel customer interactions - webchat, social media

Insights into voice of customer (analytics), value added services

Contact Centre for UK

1 Distinctive location to deliver contact centre activities across channels for the UK, US and Australian market

SA offers 55-70% arbitrage potential from source destinations

19-20

55-60%

UK (Liverpool)

Australia(Melbourne) South Africa

60-62

USA (Dallas)

49-51

56-58

Fully loaded operating cost per job for contact centre services1,2

2014; USD ‘000s per annum per job

Ongoing operating costs 40-45% lower than near-shore locations in the UK (e.g., Northern Ireland)

64-66% 67-69%

There is arbitrage potential of 45-50% (including sales and corporate overheads)

1 Represents ongoing operating costs excluding sales, account management and corporate overheads. Includes compensation, facility, technology, and administration costs associated with service delivery2 Exchange rate used: 1 USD = 13 ZAR, 1 GBP -=20 ZAR

Source: Everest Group (2014)

South Africa’s key competitive advantages

Largest domestic market in the continent – contributes ~25% of continent’s GDP

Stable political and attractive economic environment

Large, skilled talent pool

Excellent infrastructure and good quality of life – comparable to Western standards

Testimonials from end-user on their experiences of offshoring to South Africa

“With rapid globalisation, Africa is emerging as the final frontier and an opportunity too costly to miss. South Africa is the gateway to that.”

– Genpact SA

“You do not get any better in Africa than South Africa. This is the Jewel of Africa... In South Africa you have first world infrastructure and third world costs.”

– MD, Britannia Biscuits

“SA has made strong inroads in the African continent, providing BPO services for South African companies expanding into Africa. This will be a more profound growth driver in the future. “

– Frost &Sullivan

USERS EXPERIENCE OF OFFSHORING TO SOUTH AFRICA

Government and industry associations provide active support to potential and existing investors

Monyetla Work Readiness Programme: Employer-led, government funded initiative to augment entry level pool Government provides ZAR 20,444 per

unemployed person trained at NQF Level 2 and ZAR R21 236,70 at NQF Level 4 and above

Employers lead a consortium to recruit and train entry level staff

4500 learners have been trained in two phases, third phase targets 5760 learners

Sector Education & Training Programmes: Key sectors include: Banking, Services,

Insurance, F&A, IT Employers can claim up to 75% of levies

paid under National Skills Fund

Assist investors in setting up operations Provide relevant information and data Help investors with local regulations,

guidelines and operations set-up

Support existing players in expansion of operations

Manage the continued roll-out of the quality assurance programme

Talent development programs Assistance provided by BPeSA Industry Association

Business process services incentives

Framework and quantum Type of incentive

Number of offshore jobs created each year Incentive

2015/16 2016/17 2017/18 2018/19 2019/20

L1: Fully loaded operating cost per job less or equal to R300,000 per annum and 80% of jobs employ youth (18-35 years of age)

Upto 400 Base Incentive1 R24,000 R24,000 R24,000 R20,000 R20,000

401-800 20% one-off bonus

Bonus calculated for each job between 401 and 8002

Greater than 800 30% one-off bonus

Bonus calculated for each job in excess of 8002

L2: Fully loaded operating cost per job greater than R300,000 per annum and wages contributing at least 65% of cost base

Up to 200 Base Incentive1 R40,000 R40,000 R32,000 R32,000 R32,000

201-400 20% one-off bonus

Bonus calculated for each job between 201 and 4002

Greater than 400 30% one-off bonus

Bonus calculated for each job in excess of 4002

Key eligibility criteria

L2: R 176,000

Applicable for offshore jobs only At least 80% of the jobs to employ youth (18-35 years) Applicable for BPO delivery staff (i.e., agents, senior agents, team leads, managers/supervisors and quality

assurance) Minimum of 50 offshore jobs by the end of Year 3 Other criteria on sustainability of jobs to be met (detailed subsequently in the document)

1. Base incentive paid for 3 years on actual jobs created and sustained2. Bonus incentive paid once in the year in which the bonus level is first achieved

Mature domestic market

Provides a skilled talent pool experienced in working with complex products

Developed education system

Generates large number of professionally qualified personnel in specialist areas/ niches (e.g. actuarial, CFA)

Similarities with Western standards

Similar regulatory framework, data protection laws, products and certifications allow easy transition and stabilisation of operations

Testimonials from end-user on their experiences of offshoring to South Africa

“By offshoring work to South Africa, the firm has maintained extremely high standards, both in terms of client care and legal advice, while cutting fees sharply”

– Kerry Underwood, Underwoods Solicitors

“South Africa is recognised as having a sophisticated and world class financial services industry. We in Old Mutual are looking to leverage our South African skills and capability for the benefit of our wider global business”

– Old Mutual

Details on “How investors are leveraging South Africa”Complex, non-voice BPO

SUMMARY OF KEY MESSAGES

Emerging locations such as South Africa are becoming increasingly important in organisations’ global sourcing portfolios

South Africa is a key destination to serve the English speaking markets of UK, US, Australia

The industry continues to generate interest and accelerate momentum with several leading global players entering the market and bullish on growth

The revised incentive programme has generated significant interest and grants worth ~51 Business Process Services projects have been approved since 2011 with an estimated spend of R820m. The South African government estimates a further R6.bn will be spent on the incentive until 2019.

South Africa’s value proposition is anchored on

Large, skilled English speaking talent pool

Deep domain skills

Significant cost savings

First World experience

Robust enabling environment

In collaboration with

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