Shared services & Outsourcing Capability in Africa

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Information about Shared services & Outsourcing Capability in Africa
Business & Mgmt

Published on February 19, 2014

Author: SarahYe1



The Scramble For Africa: Why This Continent is on the Cusp of Being Discovered All Over Again?

The vast continent of Africa has much to offer in terms of Shared Services & Outsourcing capability. And while its colonial past has produced a cultural familiarity that is attractive to much of Europe, there are a host of other reasons why companies around the world should be taking a second look at the region.

The Scramble For Africa: Why This Continent is on the Cusp of Being Discovered for Services Delivery 1 | JANUARY 2014 THE SCRAMBLE FOR AFRICA: SERVICES DELIVERY

The vast continent of Africa has much to offer in terms of service capability. While its colonial past has embedded a cultural familiarity to certain European countries that is today proving valuable, it’s also the language capability, cost-competitiveness, and convenient time zone location that is causing companies around the world to take a second look at this still relatively untapped continent. Anirvan Sen, MD of Asia, Middle East & Africa, Chazey Partners, expects to see an uptick in interest. 2 | JANUARY 2014 THE SCRAMBLE FOR AFRICA: SERVICES DELIVERY

Morocco and Tunisia – North Africa These countries have the advantage of language, namely French, English, Spanish, and Arabic. They are of interest, specifically, to a European clientele, offering a nearshore location with time-zone advantages, and cultural familiarity. In addition, Morocco is experiencing an influx of second generation Europeans of Moroccan heritage who are moving back (“reverse migration”) and helping to set up or kick-start local businesses and the economy. The cultural familiarity and know-how that these people are introducing into the country also acts as an inducement to European business. Kenya and Uganda – East Africa Highly talented, English speaking workers with technical skills that can support operations. These areas are not focused on competing with the Philippines or India however; instead, they offer real value and opportunities for regional operations – for example across Tanzania, Ethiopia, and Malawi – to leverage skilled staff for support services by running shared services in these countries. Ghana – West Africa Politically stable, native English speaking. Offers opportunities for neighboring Nigeria, as it has a significantly lower cost of living, and can provide support services to Nigeria’s oil industry. Additionally, Equatorial Guinea, Ivory Cost and Democratic Republic of Congo – all of which host significant oil operations – are keen to leverage the native English language speakers of Ghana to support their operations, whose business language tends to be English. Ghana was one of the first countries in Africa to gain independence, and is one of the most stable countries in the region. It also offers cultural affinity across African countries and thereby has a significant advantage over Asia or East European operations. South Africa Financially, South Africa is structured like a Western economy (eg, fiscally) and is leveraging this to attract high-end knowledge processing work – whether outsourced or captive. The country offers a convenient time zone and also cultural familiarity to European countries (especially the UK and other North-western European countries). However, the majority of the shared services business conducted here is internal to South Africa or extended to Southern Africa (Botswana, Mozambique, Zimbabwe, Zambia, Namibia). Its relatively European lifestyle has lead many companies from Europe to establish their African operations here first. Government is fairly transparent and it's relatively easy to set up and run a business. In addition, language skills are very strong: apart from English and Afrikaans (Dutch), there are also native German and Portuguese speakers. As a result, South African centers are able to support Portuguese-speaking operations in Mozambique or Angola. Finally, it is also an attractive destination for skilled workers from other African countries, and thus benefits from talent immigration. However, government needs to actively promote their strengths more actively compared for example to India, Malaysia or the Philippines. 3 | JANUARY 2014 THE SCRAMBLE FOR AFRICA: SERVICES DELIVERY

SO, WHAT DOES THIS MEAN FOR YOUR OPERATIONS? 5 reasons to consider Africa… and a few warnings …if your business is based in Europe, Morocco and South Africa present the main opportunity. Middle Africa (Ghana, Kenya and Uganda for example) would be of interest mainly to organizations wanting to set up a Center of Expertise for the continent especially if a large part of the business is in Sub-Saharan Africa 1. 2. 3. 4. 5. The main advantage for European business is time zone and the same working week, and in South Africa especially, a similar working culture Availability of plenty of talented people and native language capability (English, Spanish, Portuguese, German, Dutch, French), especially given the trend of reverse migration for some African countries. Native English speakers are an enormous advantage. Regulatory framework in South Africa is based on Europe, and therefore tax or fiscal environment is inherently familiar. Countries that are developing their capability, especially South Africa, are investing in an excellent infrastructure, while still at lower cost than Europe. Growth of industries that are attracting foreign companies. A recent McKinsey Report cites agriculture, banking, infrastructure, consumer goods, telecommunications, mining, and oil & gas as growth markets that will provide the engine for pan-African growth. And with more than a quarter of the world’s arable land in Africa, that statistic alone gives pause for thought, and paints a picture of a future worth investing in. 4 | JANUARY 2014 THE SCRAMBLE FOR AFRICA: SERVICES DELIVERY …if your business is based in Asia, South Africa, in particular, is viewed as a relatively low-risk entry point for the continent. Whether mining, shipping, computing, technology, or oil – any company wanting to grow across the African market will be considering South Africa as the natural starting point. Sahara Computers, for example, is one of the largest PC suppliers across Africa, but is owned by an Indian-based conglomerate. Its South African operation is spearheading pan-African operations. So for any Japanese, Chinese, Korean or Indian company eyeing the African market, South Africa presents an obvious opportunity. Africa’s leading industries are mining and petroleum, and it is in these sectors that we are seeing significant interest from companies around the world, and especially Asia. Though mineral rich, the region tends to lag in technical or financial muscle power to exploit these industries and still relies on foreign operators for implementations. And while some African countries are still boycotted by international business as a result of perceived human rights or other violations, Chinese businesses are increasingly stepping into the breach and expanding relations in these markets. The mineral and the oil and gas resources across middle African countries are acting as a huge lure to Chinese and Indian enterprises in the same industry, who see opportunities for expansion.

…if your business is based in Latin America, a significant attraction is the Portuguese language capability of Mozambique and Angola, for Brazilian operations. Much of this is driven by technical needs, and financials, and Brazilian companies are leading most of Latin America’s forays into African markets. …if your business is based in North America, and if you are involved in the mining, petroleum, or coffee industries, Africa’s markets are acting as a strong draw for your operations. Ethiopia and Ghana are amongst the largest coffee producers in the world, and every coffee drinking economy will want to get in on the action. Additionally, a large percentage of aid, or NGO, types of organizations are operating in Africa, many of which are run by European or American organizations. For these organizations the advantages of setting up a centralized services or support center nearshore in Africa are very convincing. 5 | JANUARY 2014 THE SCRAMBLE FOR AFRICA: SERVICES DELIVERY However, there are also significant challenges inherent to operations in the region. 1. South Africa, for example, insists on a percentage of jobs allocated for the domestic workforce (B-BBEE), and as this element of the population gains in training from BPO providers or captive services centers, it also becomes more mobile 2. Infrastructure and office space: outside the main urban areas it can be difficult to find quality office space in a secure environment. Utility services are not always reliable in rural areas. 3. Benchmark data: it may be difficult to get your hands on comparative data – so start compiling your own or reach out to peers to create informal networks. 4. Talent retention: Set up a talent pipeline and invest in your staff to ensure business continuity and minimize knowledge loss when someone leaves.

Summary Africa has always been seen as the final frontier, and has, over the past two decades, enjoyed greater stability than in the past. As more economies mature, thereby offering business opportunities, they attract international investment. Africa is emerging as the new battleground for global economic powers. What this means is that companies need to have a robust “Africa” strategy, to succeed. This strategy will dictate where and how to establish posts from which to grow. With the wide-spread European and native English language skills on offer, a time zone conducive to European markets, and large-scale industries that are attracting some of the biggest companies from around the world, Africa finds itself at a remarkable pivot point in its economic history. Tips on Remuneration Strategies for the African Market With Africa being promoted as the next wave for business growth and expansion, more and more multinationals are looking to set up an outpost from which to manage and guide their growth strategies across the region. One of the significant factors driving this decision is cost, more specifically: wages. A recent report* by the Hay Group on pay trends quotes: “ The lack of maturity in remuneration management in this region, as well as the high level of variability provides multinationals with the opportunity to develop policies and practices that significantly differentiate themselves and establish competitive advantage.” The report goes on to recommend the following best practices to any organization wanting to set up operations in this region: 1. Recognize that remuneration structures vary more significantly between different countries and levels of job than might be expected. 2. Consider different policies for different employee groups. 3. Understand the career progression dynamics, which have an impact on both organizational structure and pay mechanisms in certain countries. 4. Modify standard approaches to accommodate unusual benefits practices. 5. Establish pay “zones” rather than market rates in order to pay competitively and compete effectively. 6. Skills scarcities are acute and long-term sustainability is dependent on in-house development of local talent or incurring high costs of expatriates. 7. Undertake a long-term approach- the ability to establish a distinct advantage through introducing best practices in an environment characterized by variability and lack of sophistication is a major opportunity. 8. Take the lead and use benchmarking to confirm the competitiveness of policy, not to establish it. *Source: <Rewarding Africa: Opportunities in the Pay trends, differences and dynamics of sub-Saharan Africa (2013)> by Hays Group South Africa 6 | JANUARY 2014 THE SCRAMBLE FOR AFRICA: SERVICES DELIVERY

For more articles from Chazey Partners, please visit or subscribe to our newsletters at Chazey Partners is a practitioners-led global management advisory business. We bring together a unique wealth of experience, empowering our clients to strive for world class excellence through Business Transformation, Shared Services & Outsourcing, Technology Enablement, Process Enhancement and Corporate Strategy Optimization. We pride ourselves in having built, operated and turned around some of the world’s most highly commended and ground-breaking Shared Services Organizations, and for implementing many highly successful multi-sourced delivery solutions. Over the last 20 years, we have delivered numerous programs globally, in the US, Canada, UK, Continental Europe, Ireland, India, Eastern Europe, South America, Singapore, Australia, China, Middle-East and Africa. Our experience covers both Private and Public Sectors, providing expertise in a wide spectrum of business functions, including Finance, HR, IT and Procurement. Learn more about us at Follow us on LinkedIn, Twitter, Facebook and Google+ CHAZEY PARTNERS SOUTH AFRICA Anirvan Sen Managing Director, Asia, Middle East & Africa E: Copyright © 2014 Chazey Partners All rights reserved. 7 || JANUARY 2014 THE SCRAMBLE FOR AFRICA: SERVICES DELIVERY 7 JANUARY 2014 THE SCRAMBLE FOR AFRICA: SERVICES DELIVERY

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