The Benefits of Offshoring to South Africa

The Benefits of Offshoring to South Africa

Employment Advice, HR

Offshoring and outsourcing options are providing significant benefits to a growing number of companies’ bottom lines.  In order to take advantage of these trends, directors and boards need to manage the processes effectively and efficiently. Especially as some countries are more advantageous for offshoring to than others, and not all skill sets available through outsourcing are equally good.

What is Offshoring?

Offshoring involves sending out a selection of traditionally in-house jobs to be done in another country(s). Usually, it involves the offshore establishment of technical or administrative service work centres. It allows a company to maintain control over the technical direction and supervision of the employed work group. While simultaneously accessing the advantages of a global workforce, but without the burden of dealing with the local country’s employer rules and regulations.

Offshoring vs Outsourcing

No company can in-house every function and need they have. Thus, to a varied extent, all companies outsource. Outsourcing is similar to offshoring in that it uses ‘external’ skilled personnel resources to fulfil business requirements.  Similarly, it’s often used as a way of accessing resources and improving quality while minimising costs. However, there are also differences.

Outsourcing involves entrusting business processes to a third-party vendor. Whereas offshoring delegates directly to a team member. Thus, outsourcing might mean that work is completed by an anonymous team. In contrast, offshoring is seen more to be an extension of a company’s team. It also means that outsourcing tends towards being a stop-gap or shorter-term quick solution to accomplish tasks. Therefore, also making it a suitable solution for ad-hoc requirements. An offshoring timeframe is usually longer, as it often involves an element of upscaling a business while addressing a need.

5 Reasons Why Companies Offshore

The primary reason that companies offshore is to save money by decreasing overhead costs. These are five examples of benefits that are linked to reducing costs through offshoring.

1. Increase Competitive Advantages

The cost of doing business varies across countries. Particularly when it comes to a country’s infrastructure and salary expectations. The combination of these two, and other, factors can result in efficiency gains. In other words, lower overhead costs enable a competitive advantage which, when leveraged, can enable greater company profits.

2. Improve Quality

To enhance the quality of their services companies, need to innovate as they grow. Offshoring enables companies to improve the quality of their existing services. And thereafter, maintain their desired quality standards through a dedicated offshore team. For those based in countries with a skills shortage, it provides a solution. One which doesn’t require a company to compromise on quality.

3. Access to Expertise

Offshoring can improve company expertise by accessing a global workforce without large labour costs. For many, it also provides a way of accessing a reliable pool of skills without the stress and hassle of hiring and managing new staff.

4. 24/7 Customer Support

Offshoring to countries with alternative time zones allows companies to provide 24/7 customer support. Which can allow a company to expand its service base while maintaining high-quality and valued services.

5. Tax Purposes

Using offshoring is a legal way of decreasing tax bills while still attaining long-term business goals. For example, in some countries regulations unintentionally increase operational costs for companies that expand.

Benefits of Offshoring to South Africa

Traditionally offshore jurisdictions were, for example, the Bahamas or the British Virgin Islands. But companies’ needs evolve, and new opportunities have emerged. As a result, South Africa is an increasingly desirable offshore option. In 2007 it was identified as an emerging offshore option. By 2019, this forecast was proving accurate, and the South African annual service growth rate was 22%. Which was almost three times higher than India or the Philippines.

South Africa’s trajectory as a leading offshore delivery location is an upward and steady one. Which is further strengthened through government incentives, constantly improving business and physical infrastructure, linguistic capabilities and labour growth opportunities. Furthermore, South Africa is regarded as a gateway to Africa. Thereby, allowing companies to service prominent African countries across the continent.

In the 2022 Ryan Strategic Advisory Review, South Africa tied with India as the most favoured offshore CX delivery location.  It’s the second consecutive year that South Africa has been the most favoured global offshore delivery point.

Notable is that countries which offer Nomad visas and fast-tracking of company registrations, do not necessarily offer the best offshore opportunities. When looking at where to offshore, it’s important to remember that location matters. Therefore, despite the appeal of honeypot offers, sound business reasons are those that extend beyond second citizenship or residency opportunities.

How to Offshore

Choosing to offshore is a strategic business decision. This means it requires planning and consideration of your new venture from all angles. To prevent costs from escalating and to legitimise your company overseas, working with a trusted and experienced partner is key.

 6 Offshore Setup Requirements

  1. Local registration of business.
  2. Procuring of business premises.
  3. Sourcing and placement of staff.
  4. Training recruited staff.
  5. Overseeing procurement and set up of equipment and IT infrastructure.
  6. Acquiring professional services of, for example, Commercial Attorneys, Accountants.

It is possible to oversee the offshoring process yourself. And in the short run, buying a shell company with an existing bank account could be cheaper. However, being a savvy and connected business owner or director in one country doesn’t always translate across borders. This inevitably means that you are likely to miss out on crucial steps. It could also put you in a precarious legal position due to laws not being standardised across countries. And you won’t have an established reference point when you need questions answered or problems solved. Which at best will escalate your offshore running costs. Or even worse, result in foreign legal bills, bureaucratic entanglements linked to tax non-compliance and no offshore entity. This is why working alongside a specialist, such as the Key Recruitment Group, will save you money and time in the long run. As well as better ensure efficiency, effectiveness and success in your choice to offshore.

Expertise in Offshoring

Key Recruitment has over 40 years of recruitment and staffing services experience within the South African context. Their offering includes provisioning a comprehensive offshoring service setup and management solution.

Offshore Services Setup Includes

  1. Providing market intelligence associated with the availability of skills and associated payroll costs
  2. Sourcing and appointment of skilled personnel.
  3. Procurement of business premises.
  4. Oversight of all equipment and IT infrastructure procurement.
  5. As Employer of Record, the ongoing provision of a comprehensive HR Management and support service. This includes participation in onboarding and monthly performance reviews through the probation period and/or other performance review programmes.
  6. Assist with the registration of businesses for companies wanting to be incorporated in South Africa.
  7. Securing of professional services, for example, Commercial Attorneys and Professional Accounting services.

Contact us today to discuss how we can help you take advantage of opportunities available through offshoring to South Africa.