When considering offshoring IT services and software development to Cape Town in South Africa, there are a few criteria that companies should take into account. If all factors are carefully considered before selection, including socio-cultural factors such as language barriers or cultural differences that can occasionally arise between different cultures, offshoring software development can be a great idea, particularly Cape Town, when considering South Africa;

It’s the new usual

Companies with locations all over the world are commonplace in today’s global economy. Companies are discovering more and more that employing software engineers from other nations can be advantageous since it enables them to access expertise that might not be accessible locally while minimizing costs.

It’s in a strategic location

Cape Town is strategically located between the Atlantic and Indian oceans, making it an ideal location for serving both African and international customers. Its location on the west coast of South Africa provides direct connections to undersea cables that connect Africa to Europe, the Americas, and Asia.

There is a favourable business environment:

South Africa has a favourable business environment, with a well-developed telecommunications infrastructure and a government that actively supports the growth of the technology sector. The country also has a well-educated workforce, which can provide the skills and expertise required to operate and maintain an IT Services and/or Software Development center.

It is more affordable to develop high-quality software in South Africa.

Currency arbitrage refers to the practice of taking advantage of price differences in different currencies to make more profit. In the case of the South African Rand (ZAR), its value is lower compared to major currencies such as the US Dollar, Euro and UK Pound. This presents an arbitrage opportunity for businesses or individuals looking to invest in development of software or contract IT services. By comparing home currency costs with South African ZAR, they can take advantage of the lower costs of development in South Africa, which is also made possible by the lower costs of living and lower wages compared to developed countries like USA, UK and Europe. These lower costs can be passed on to customers, resulting in lower prices and increased competitiveness.

The same level of work will be produced as if you were working with an onshore developer, but often at a reduced cost, Of course, the best resources can be only marginally cheaper then home but then you’ll also get higher quality and more capability that will translate into faster and better production rates and consequently, even higher profits.

IT Management-as-a-Service is also more affordable from South Africa

A global move to the cloud is enabling companies to access a pool of certified and experienced skills that were previously unavailable. Government subsidized training and Vendor sponsored training schemes provide a constant stream of new talent in this arena. Access to almost-free online training and resources is a boon for the South African workforce who struggle to pay for formal post-grad education. Online courses are a huge bonus

The talent is of a relatively high quality

As one of the most developed countries in Africa, South Africa has some of the top software developers in the world. In fact, due to their expertise and experience, they are frequently hired by other businesses to work on projects outside of South Africa.

There is a sizable pool of gifted and knowledgeable software engineers. These developers can write high-quality code for clients in other countries with the appropriate onboarding.

It is a predominantly English speaking workforce

English is the official business language in South Africa, and the country has a skilled English-speaking labour force. A huge proportion (42%) of the more than 60 million people can read, write and speak English.

English and Afrikaans speaking South African accents are relatively easy on the ear for most countries and is not too dissimilar to the Australian accent.

Time zone compatibility

Differences in time zones is an important consideration but they can be turned to your advantage as you will see below. First, lets start by looking at the time zone differences

Note that these time differences may be affected by daylight saving time, which is observed in some regions. Additionally, the actual time difference may vary depending on the specific locations within these time zones.

As you can see below, there is a small overlap in standard office hours between South Africa and London, as well as between South Africa and Central Europe. However, there is a significant difference in office hours between South Africa and both the East and West Coasts of America. This can make scheduling meetings or conducting business across these regions challenging.

Differences in time zones can be exploited to clients advantage using a briefing window approach illustrated above, followed by a period of development whilst you sleep, and a review of the work during your office-hours in a repeating cycle, that can be far more effective than having coding and reviews happening simultaneously.

You can also cooperate with your offshore software development team to make sure that they are always available when you need them, without compromising the level of service you would otherwise expect from an overseas team. Many developers prefer to work in the evenings and have their days free.

The workforce is becoming more & more educated

In South Africa, education is considered a fundamental right, and the government is responsible for providing access to basic education for all children. In practice, however, access to education remains a challenge for many South Africans, particularly those from low-income households and rural areas.

Higher education in South Africa is not free, and tuition fees at universities and colleges can be prohibitively expensive for many students. The government has implemented various initiatives aimed at improving access to higher education, such as the National Student Financial Aid Scheme (NSFAS), which provides financial assistance to eligible students from low-income households. However, the funding provided by NSFAS is limited, and many students still struggle to cover the cost of tuition fees, accommodation, and other living expenses.

Access to the internet is changing everything for South African’s that cannot afford post-graduate education and growth of internet traffic is running at 442,000% (see below). Growth of more accessible technologies such as WhatsApp is even more astounding. According to a report published by Statista, as of January 2021, there were approximately 38 million active WhatsApp users in South Africa. Additionally, it’s worth noting that WhatsApp usage in South Africa is particularly high, with the platform being widely used for communication and business purposes. In fact, a survey conducted by the World Wide Worx in collaboration with Platinum Seed in 2020 found that 96% of South African respondents who used messaging apps reported using WhatsApp, making it the most popular messaging app in the country.

There is high levels of cultural compatibility with Western and European cultures

When collaborating with a South African company on an offshore project, cultural differences should are seldom a problem. Many South Africans are of European descent and the local population has been heavily influenced by European culture including legal and educational systems and standards.

South Africans have a strong work ethic

South Africans have a global reputation as hard workers that take their professional life seriously and invest in personal growth, striving to become more successful. Many South Africans support extended families as there are strong familial bonds and younger generations take responsibility to take care of their elders in later years.

The Infrastructure and Technology environment is strong and growing

For businesses who can outsource their IT services to another nation, there are more than enough infrastructure solutions available. South Africa’s infrastructure is strong and dependable, especially when compared to many other nations for IT outsourcing.

The nation’s communications infrastructure is state-of-the-art, and fibre optic connections connect all significant cities and towns.

South Africa’s average download speed is cited at 68.9 megabit per second (mbps) compared to the average global download speed of 77.7 mbps. However, the growth rate of internet traffic in South Africa is currently around 442 000% [1]. This means that the number of South Africans who regularly go online has doubled in the last decade. Currently, 70% of South Africans have internet access. South Africa ranks number one on the continent in terms of digital quality of life [1].

Consequently, there is an International fibre bandwidth explosion happening in South Africa. Submarine fibre cable systems landing in South Africa will help improve Internet capacity in the country while letting the big players behind them get more customers onto their apps or ecosystems.

Two huge new cables – Equiano and 2Africa, respectively backed by Google and Facebook – will impact broadband in South Africa. Equiano landed in South Africa in August 2022, while 2Africa is scheduled to go live in the fourth quarter of 2023.

It has been predicted that by 2027, 90% of South Africans will be regularly using the internet. With increasing demand, we are likely to see an increase in supply – faster and more affordable connectivity. The South African government has set the goal of providing internet to all citizens by 2024, not only those households who can currently afford the service.

Workforce interest in the IT sector is growing too: According to data from Statistics South Africa, in the first quarter of 2021, there were approximately 365,000 people employed in the “Information and communication technology” industry in South Africa. However, it’s worth noting that this industry includes not only the IT sector but also other sub-sectors such as telecommunications, broadcasting, and publishing.

To get a more accurate estimate of the number of people employed specifically in the IT sector, we can refer to data from the professional association for the South African ICT sector, the Institute of Information Technology Professionals South Africa (IITPSA). According to their 2020 IT industry skills survey, there were approximately 120,000 people employed in the IT sector in South Africa at that time.

It’s difficult to provide an exact number of software developers based in South Africa, as there is no centralized database or registry of all software developers in the country. However, we can use some estimates and data to get a rough idea.

According to the Institute of Information Technology Professionals South Africa (IITPSA), there were approximately 53,000 people employed in the “software development and programming” occupation in South Africa in 2018. However, it’s worth noting that this figure includes not only professional software developers but also other related roles such as programmers and software engineers.

Overall, while it’s difficult to provide an exact number, it’s clear that there is a significant and growing community of software developers in South Africa.

The big three are here already

Microsoft has a significant presence in South Africa and has made significant investments in the country over the years. The company has several offices across the country, including in Johannesburg and Cape Town, and works with a range of customers and partners in the region. Microsoft has also been involved in various initiatives aimed at promoting digital transformation and skills development in South Africa, such as its Digital Skills for Africa program, which provides training and certification opportunities for people in various areas of technology. Additionally, Microsoft has made significant investments in cloud computing infrastructure in South Africa, with the company announcing the launch of its first datacentres on the African continent in 2019. Overall, Microsoft’s presence and investments in South Africa reflect the country’s importance as a growing market for technology and digital innovation.

Global e-commerce giant Amazon.com is on a hiring spree in South Africa, predominantly in Cape Town, with over 200 positions available in the country – 60 added in one month in October 2022. According to Amazon’s job listings, the group is fighting for many of the same technical skills that are in high demand across several sectors in South Africa, including machine learning experts, engineers and software developers.

Also in October 2022, tech giant Google announced the launch of a cloud region in South Africa, its first in the continent, playing catch-up to other top providers like Amazon Web Services (AWS) and Microsoft Azure, which made inroads into the continent a few years ago.

Political stability is mainly improving

With a somewhat higher than 20% unemployment rate, South Africa has a robust economy. With a GDP (Gross Domestic Product) of $435 billion annually [2], the nation has one of the biggest economies in Africa.

South Africa is a member of the G20, and is the only African member of the group [2].

A free press, independent judiciary, efficient tax collection infrastructure and powerful private business operate in strong contrast to a generally corrupt political layer that inefficiently manages state owned entities. The current trajectory is that private business will ultimately prevail and take over many of not all of the non-functioning government services including Energy and Electricity supply, Postal Services and Travel.

There are many State Owned Entities (SOEs) in South Africa, spanning a range of industries and sectors. The exact number of SOEs can vary depending on how they are defined and classified, but there are estimated to be around 700 SOEs in the country. These include large entities such as Eskom, the power utility company, and South African Airways, as well as smaller organizations such as the National Film and Video Foundation and the Council for Geoscience. SOEs play an important role in the South African economy, providing essential services and infrastructure and contributing to job creation and economic growth. However, many SOEs in the country have faced challenges with governance, financial sustainability, and operational efficiency, which has led to ongoing efforts to reform and improve their performance.

Diversity & inclusion

There are numerous advantages to employing someone who lives distant from where you do, especially if they reside in South Africa, if you’re working on a project for your business and want to locate someone who can help design your website or create new software applications for your firm.

Labour laws & legal considerations

Companies that outsource software development can more easily be reasonably certain about what they must do legally when contracting with offshore firms rather than individuals.

Teams of teams

IT Services and software development companies in South Africa abound, providing high-performing teams comprising specialized, complimentary skills to complete projects. This is considered a far more effective approach than contracting individuals as professional management, accountability and continuity provided by these firms.

Should you, or shouldn’t you?

If all factors are carefully considered before implementation, including socio-cultural factors such as language barriers or cultural differences that can occasionally arise between different cultures, offshoring software development to Cape Town in South Africa can be a great idea.

Offshore software development can significantly boost production along with quality whilst cutting costs. This is especially true for businesses looking to outsource their IT services from a developed nation to an emerging market in order to benefit from currency arbitrage.

Dollar, Pound and Euro currencies compare favourably versus the South African Rand so it can also be a fantastic opportunity.

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