South Africa scores well as an outsourcing destination in terms of legal and tax incentive requirements, says UK law firm Baker & McKenzie, although there are issues surrounding privacy requirements.
Ross McKean, an associate of Baker & McKenzie, compared SA, India, the Philippines, Hungary and the People`s Republic of China on the legal and regulatory aspects, repatriation of profits, labour requirements and administrative issues.
McKean was speaking at the International Customer Offshoring Conference held in Cape Town this week.
Offshoring of call centres and business process outsourcing has become an important business in SA, and in particular the Western Cape, where 11 000 people have found employment in the industry.
"A number of British-owned companies have either set up operations directly or indirectly and the laws of the UK, EU and the target countries have to be considered," McKean says.
According to his research, the enforcement of rights, or contracts, can take up to 10 years in India, while in SA it takes three to four months and a further one to three years on appeal. In the Philippines, a court judgement can take one to three years and three to six years on appeal. Hungary takes only six months, while there is no precedent for China.
Restrictions on implementing seven-day, 24-hour services can have some restrictions depending on the country. India has only recently lifted restrictions on women working at night. In SA, employers must arrange transport for night workers and in the Philippines there are restrictions on women working between midnight and 6am. China and Hungary have no restrictions.
Countries with similar labour laws to the UK`s Transfer of Undertakings and Protection of Employment are SA "if it is a going concern", and Hungary is implementing one. India, the Philippines and China don`t have them.
McKean says SA and Hungary are administratively easy for the setting up of a corporation, but India, China and the Philippines are more complex.
Hungary was cited as the most open for the repatriation of profits, with the other countries having some kind of foreign exchange controls. McKean says South African authorities prefer to allow the extraction of profits through a dividend rather than management fees or royalties.
"Offshoring has become a political hot potato in Europe and the US, and there are a number of laws there that companies have to be aware of."
He says there are 130 US State bills (laws not yet passed) that will restrict offshoring practices and in France there is a requirement that a call centre operator will have to tell the customer where he or she is physically located.
Finally, there are the data protection and privacy laws, which are quite rigid in Europe, such as the UK`s Data Protection Act, although a little less so in the US.
SA does not have a privacy law, although the Law Society is working on one.
"Data protection and privacy are laws that various jurisdictions are just coming to terms with. For countries that don`t have them, they are very peculiar beasts," McKean says.
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