South Africa has become a preferred Legal Process Outsourcing (LPO) off-shoring destination as well as the staging ground of choice for international law firms seeking a jurisdictional foothold for sub-Saharan African business opportunities.
Named best “Offshoring Destination 2012” by the UK’s National Outsourcing Association (NOA), Winner of the European Outsourcing Association Awards last year, and Winner of the Skills Development Programme of the Year 2014 at the NOA Outsourcing Professional Awards, South Africa has risen to rank among the top three global offshore locations that can provide quality English language skills, and excellent writing skills, on a large scale.
A recent review of nine outsourced locations by the London School of Economics has positioned South Africa in second place after India.
The country’s English language alignment with the UK and Australia, however, in terms of accent, word-choice and cultural compatibility, is rivalled only perhaps by smaller UK nearshore jurisdictions such as Northern Ireland and Scotland.
As companies, and consequently law firms, in Europe Middle East and Africa increasingly turn to alternative legal service providers in offshore locations to find more efficient ways of handling their legal service requirements, South Africa offers a uniquely competitive combination of commercial advantages in terms of talent, cost and location.
Increasingly, corporate law departments have turned to legal outsourcing as a solution, which allows costs to be reduced while maintaining or increasing quality.
This process involves an organisation in the source jurisdiction, eg the UK, hiring LPO vendors in offshore jurisdictions to provide offshore lawyers at a lower cost than lawyers are available in said source jurisdiction.
So instead of hiring UK lawyers to perform contract drafting, transactional due diligence work, or document review work, the organisation finds quality Indian or South African lawyers to perform such services at significant cost savings.
In terms of service expertise, the country specialises in legal, financial services, and healthcare domains with a cost base which is – on average – 50 percent to 60 percent lower compared to primary source markets.
Coupling such talent and savings with a uniquely favourable time zone aligned with Europe while also overlapping with the Americas and Asia, and the underpinnings of South African success story, despite the growth of competition among offshoring locations, becomes evident.
In the past few years, the country has specifically emerged as an ideal location for the delivery of legal support services to corporate in-house functions and law firms based in the UK, Europe and Australia, with the US and Canada in the wings.
This support covers standard LPO services, such as drafting, negotiating and managing commercial contracts for corporate law departments, performing due diligence for deals (mergers and acquisitions) or for compliance reasons, and conducting document review in support of pre-trial discovery.
South Africa also hosts captive operations and outsourcers who administer high-volume transactions such as personal injury claims processing for the insurance industry and assisting with conveyancing transactions, for example title checks.
For organisations that have effectively leveraged this tool, legal outsourcing has also brought inherent scalability and flexibility to their operations, enabling them to cope with the peaks and troughs of demand.
There are a number of factors that make South Africa a leading outsourcing location, some of which have only recently crystallised in concert with broader developments in the international legal market place.
The most important attribute remains the country’s legal talent.
The product of a top-tier educational system and carefully monitored professional legal community, the country’s lawyers have the legal training, English legal writing skills and English language skills to function as seamless offshore extensions of their client base operating out of a range of source markets.
As legal outsourcing has gained acceptance, legal organisations now require offshore destinations that can handle complex, one-on-one, live communications that require an articulate and culturally in-touch lawyer.
That is precisely the kind of support a South African lawyer comfortably provides.
In addition to legal talent optimally suited for legal outsourcing, the country also provides material cost-saving over both source and most near shore jurisdictions, while narrowing the difference with competitive offshore locations such as India and the Philippines.
The South African government, through the Department of Trade and Industry (dti), provides strategic support by way of substantial incentive grants to reduce operating costs for LPO service providers by 11 percent to 12 percent and spur LPO market development.
These incentive grants are calculated on the number of projected offshore jobs to be created based on a tapering scale and is awarded on actual offshore jobs created.
I will be travelling to London to launch the revised Business Process Services incentive scheme, one that looks to build upon the success of the previous scheme which led to the creation of 9 077 jobs on the back of financial disbursements of R587 million.
Besides financial incentives, the dti through Trade and Investment South Africa (TISA) offers a facilitation service for prospective and current investors which allows seamless entry into the country from an investment perspective.
Rob Davies is Minister of Trade and Industry