South Africa releases national GBS quantification report to global analysts and investors

Key Facts and Highlights

• South Africa’s domestic and international GBS/BPO market is estimated to be worth $4.7 billion and employing over 261,000 workers.

• The largest global markets serviced from South Africa for GBS services include the UK (61%) with notable and ongoing growth in the US (20%).

• South Africa delivers 18% (estimated) better customer experience (CX) quality when compared to competitor offshore markets, translating into 5% higher customer retention each year.

Global analysts and investors who attended a three-city tour of South Africa were presented with key research findings from the 2021/22 South Africa Global Business Services (GBS) National Quantification & Investment Report at Maropeng, Cradle of Humankind, on March 24, 2022. The report was commissioned to Genesis Global Business Services by Business Process Enabling South Africa (BPESA) with the aim of assisting global analysts, investors, business buyers and service providers in obtaining strategic market intelligence, benchmarking data and insights into South Africa’s vibrant investment potential in outsourcing services. What’s inside The report comprehensively unpacks South Africa’s GBS profile against a backdrop of the market from a global, regional, national and provincial level. These contexts provide perspective into key elements that enable South Africa’s GBS market: skills, human capital and talent, infrastructure (physical and ICT) and investment environment. Insights into what vertical industries are serviced by South African GBS operators are uncovered. In addition, the report shows the composition of South Africa’s horizontal GBS service lines, including customer experience (CX) or contact centre services, digital and IT outsourcing (ITO) and business process or shared services. South Africa’s rise as a regional GBS powerhouse With an estimated market size of US$4,7 billion and employing over 261,000 workers, South Africa’s GBS sector is the largest in Africa. A deep talent pool, specialist niche services and significant cost savings are some features that propel South Africa’s regional GBS status. Approximately US$915 million was generated in international revenue, whereby 54,244 international cumulative GBS jobs were created between 2018 and 2021. Driving South Africa’s offshore segment are its global source markets, the largest being the UK, comprising 61% of the country’s international GBS services. The US (20%), and Australia (8%), are the second and third largest GBS source markets to South Africa. At a time where African delivery locations are leveraging their multilingual capabilities to attract offshore business, South Africa is internationally renowned for its proficient English-speaking GBS workforce. Local GBS workers are favoured for their neutral accents and cultural affinity to both brands and consumers in the US, UK and Australia. As such, voice and non-voice CX or contact centre services receive the bulk of offshore demand. Inbound (28%) and outbound (14%) customer service and support, and outbound sales calling (11%) are the top CX services delivered to the global market. Telecommunications, retail and utilities are the biggest vertical industries serviced between these source markets. Relatively more complex ITO services are also dispensed from South Africa’s shores, notably in technical support (19%), applications and support management (12%) and application development (10%) services. The remaining 59% of digital services are broken into smaller deliverables, such as cyber security, data centre functions, Contact-Centre-as-a-Service (CCaaS) and unified communications. The country is also renowned for operations and administration back office support, payroll and accounting services, debt recovery and credit lifecycle management and its expertise in human resource service delivery. Cost and value competitiveness However, when compared to Egypt, India, Jamaica and the Philippines, South Africa’s salary and total loaded operating costs are slightly higher. To stay competitive, a GBS Incentive Plan is offered to would-be investors. This is a five-year cash grant allocated to operators who employ and sustain a certain number of workers, especially youth and impact sourcing workers from previously disadvantaged communities. When implemented, a GBS operator can reduce their operations expenditure further between 8% to 10%, heightening South Africa’s desirability as an offshore GBS location. Additional financial contributions are offered via some of the mature provinces, particularly when setting up in Special Economic Zones. This is further augmented by the country’s ability to improve customer lifetime value through excellent quality CX outsourcing. Analysis confirms that South Africa delivers an estimated 18% better CX quality when compared to competitor offshore markets, translating into 5% higher customer retention each year. As a result, greater customer lifetime value (CLV) and bottom-line profits/benefits are realized. The South African GBS sector has also been earmarked as a priority sector by the government which recently launched the GBS Masterplan with industry stakeholders. The plan is a detailed blueprint to create 500,000 cumulative international jobs in the sector and to optimize annual export revenue. Feedback from potential global investors Potential investors were asked what would attract their organizations to outsource CX and voice services to South Africa. Cost performance benefits, work-at-home and on-site hybrid working models and vertical industry-specific expertise and talent were identified as major drawing cards to potentially invest in South Africa. The same was asked for digital or ITO functions, where skilled data management services, data analytics and data science expertise and reliable technical help desk services were expressed as the major investment criteria. Other key findings South Africa’s international GBS activity is largely concentrated in four of the country’s provinces. The Western Cape accounts for 46.90% of international service delivery, followed by Kwazulu-Natal (36.70%), Gauteng (15.48%) and Eastern Cape (0.67%). Most delivery sites are only situated in one or two major metros in each province. However, the country’s spread of robust infrastructure combined with rich pockets of talent across its nine provinces lends huge opportunity to scale and grow delivery sites in untapped Tier II cities. Directing GBS investment to these locations will provide additional hub and delivery locations. Gearing Tier II cities for GBS delivery also opens further opportunities for impact sourcing. Impact sourcing is a well-established practice in South Africa, where 85% of local GBS operators use it to employ talented, committed workers and make positive changes in previously disadvantaged communities. Consequently, between 78,000 and 90,000 of South Africa’s GBS workforce are impact sourcing workers, accounting for a third of the workforce. Granular insights Data was collected from the national quantification survey, where 228 quantitative and 48 qualitative interviews were conducted with 136 South African GBS/BPO operators at various operating levels. In most cases, two interviews were conducted with different executives at each organization to obtain the required data and insights. Of those interviewed, 59 operators indicated that they service global source markets. Findings also emerged from the 2021 Global Vertical Industry Demand Survey by Genesis GBS, which interviewed 360 executives of global enterprises that outsource and offshore services to key global delivery regions. Additional key data was also drawn from the 2021 Africa GBS Benchmarking & Market Report produced by Genesis GBS.