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Despite Upheaval in the Group, Serco South Africa's Prospects Remains Bullish

In the last twelve months we have more customer management services (CMS) BPO investment in South Africa, including 

  • Webhelp setting up centers in Cape Town and Johannesburg with an agent headcount approaching 1,000
  • Capita transitioning part of its O2 support to Cape Town in the form of a ~1,400 seat operation.

One (of many) attributes that make South Africa such an attractive destination to CMS BPO vendors (and to organizations looking to setup captives) is the tax grants offered. Recent announcements by the South African DTI have indicated that in order to qualify for future tax grants foreign BPO providers would need to have a level four BEE status, the qualification of which is soon to become more stringent. Serco South Africa is ideally positioned to take advantage of this, given its 100% South African management team and partial black ownership. Serco is in a fortunate position in that it can comply with the new BEE Level 4 requirements which kick off soon, although they are due to be reviewed again at the end of next year.

Serco initially opened a 500 seat center in Cape Town in March 2013, as part of a move to transition some of the CMS support for U.K retail client Shop Direct from onshore to offshore locations in India and South Africa. Serco has built up a thriving center in Cape Town, and currently has ~700 FTEs deployed on the Shop Direct contract. 

When Serco originally entered South Africa its sole aim was to provide offshore support to U.K. and potentially Australian clients; this strategy has since undergone a rethink with the upheaval of its U.K. reputation following the e-tagging scandal in 2013 which, although happening in a different part of the Serco Group impacted the ability of its private sector BPO business to win new deals. Serco is now also actively courting domestic South African clients in the telecoms, media, BFSI and retail verticals. It is currently running a customer care webchat pilot for a domestic telco and is also in talks with a local retailer to provide in-store e-commerce support. If all goes to plan Serco should have ~700 FTEs providing domestic support in its Cape Town operation by end of Q2 2015.

Serco’s agent acquisition program in Cape Town has a very personal flavor with the country MD Fagri Semaar, conducting radio appearances as well as University and school presentations in order to acquire talent. Currently the company has 64k applicants on its database. 45% of applicants are inexperienced in contact center delivery, though the vast majority are from a previous customer service background. Serco has moved away from a purely skills-based hiring approach in its Cape Town operations with applicants initially completing a psychometric evaluation that is weighted towards the vertical, service line and end user position the applicant is applying for. Currently Serco is hiring one in five applicants in its Cape Town operation. 

Now with Serco’s recently announced strategy review, what does this mean for its South African operation? As part of Serco’s private sector business, it will be one of the units to be sold off. Whilst this will result in uncertainty in the near term, the dropping of the Serco brand should help the U.K. private sector business in its go-to-market efforts which potentially means increased work for South Africa.

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