South Africa IT jobs given to foreign nationals

Even with an unemployment rate of 25% there is evidence, especially in the financial services sector, that more and more foreign nationals are brought into South Africa to take up information technology (IT) work here. This in spite of ideals – legislated and compliance expected from the private sector – for local empowerment through BBBEE.

The reasons given by major players in the sector are lower costs, but also the on-demand availability of these skills. While skills are coming into the country from all over the world, a major trend appears to be especially Indian foreign nationals coming into South Africa to complete the work in-country and on-site, but other countries like Zimbabwe are also represented.

Several smaller IT consultancy firms have confirmed that they have seen a rise in foreign nationals being used for this work or the outsourcing of IT jobs off-shore to specifically India.

One SAP consultant working for a local consultancy firm, wishing to remain anonymous, said he has worked on financial services projects where whole floors are filled with Indian nationals brought in for six months or longer.

According to Craig Lithgow, BlueWare Consulting director, there has been a dramatic increase in IT skills importation over the last couple of years.

“There are many more Indians, for example, here than before. Some are very well qualified and are working locally, doing great work. Others are performing menial work that could be done by South Africans with a secondary qualification,” he told Moneyweb.

Warren Eiserman, director at Handguns & Tequila (a software development and boutique SaaS consulting business), confirmed that although some corporate customers are still “a little suspicious of off-shoring,” the largest penetration is in the financial services sector.

Kamal Ramsingh, leader of the Technology Business at Deloitte South Africa, told Moneyweb that the financial services companies have been amongst the first to embrace the off-shoring model of IT service delivery and that most of them now consider this model as part of the standard operating model for IT.

He said that the company could not give specific figures, but that the number of Indian nationals brought into South Africa is increasing overall as more multinational companies are present in the country.

No updated critical skills list– gaps in legal framework

While the Immigration Act of 2002 (amended in 2004) creates the space for the importation of skills to promote economic growth in the country, it does stipulate that in the case of scarce skills quota work permits, this has to be done based on a scarce skills list, updated at least annually.

The latest list, however, is from 2009. Some amendments to the act were published in 2011, which will collapse two work permit categories (scarce skills and exceptional skills permits into one category), but these have not come into effect yet as regulations from Home Affairs are still outstanding.

Some roleplayers argue that this leaves the context in which foreign skills are brought into the country in a hazy state, with no annual updates to the existing skills list and the new critical skills list under the amended legislation not in place yet.

Chief director for permits at the Department of Home Affairs, Jack Monedi, disagrees.

“There is no hazy state in terms of recruitment of critical skills. The 2004 legislative framework is still in place and the 2009 list remains in force and is the one that we are using,” he said. He told Moneyweb the list has not been updated since then because the department is busy with the amendment of the act and the new regulations and this will mean various processes are affected. “‘Hazy’ means we are unable to adjudicate, and that is not the case,” he said.

Monedi said that moving forward five departments will be involved in the compilation of the list – Home Affairs, Economic Development, Labour, the dti and Higher Education. He said the next quota list, which can only be drawn up once the regulations are in place, would be more inclusive. Regarding a timeline for the regulations’ finalisation, Monedi said he cannot commit to a time, but hopes it will still be this year. That will mean that the existing 2009 quota list will have been in place for four years without being updated.

Cheaper to off-shore or import skills?

According to Eiserman, outsourcing for smaller companies looking to have a specific technology tasks performed has become a viable alternative, especially those looking for a low-cost alternative. He said online market places for commodity skills are gaining in popularity. Larger IT implementation companies, such as Deloitte and Accenture, often use blended rates where local resources are augmented with large off-shore development centers. But not everyone agrees that off-shoring or importing foreign IT skills works out cheaper in the end.

Moneyweb has learnt that one global IT services and solutions provider quotes R360 to R380 per hour for testers and developers who are onshore (onsite) and only R178 to R225 for those who are offshore (hosted in India). This is compared with local offerings of R300 to R450 for similar resources through South African consulting firms. The high-end audit firms, however, could charge as much as R500 to R650 for the same resource. Sources in the industry indicate that in many cases on-site or off-shore IT testers from India only receive a fraction of this amount.

“I think the claim that off-shoring or importing skills are cheaper is the biggest lie in IT, to be frank,” says Lithgow. He said when taking cultural differences and language issues, time zone differences and sometimes just a lack of expertise into account, the business users often suffer because of an executive decision “to cut costs”. “We have proven that a small team of very good individuals beats a mass of cheap labour any day,” he says, adding that some of the more menial input data and test scenario work could easily be done by South Africans with a secondary qualification and some training.

Marius Jooste, director of consultancy firm Quinxi, agrees with Lithgow. “Communication, language and cultural barriers, increasing project times, could eventually cause the actual net-financial benefit to be much lower than anticipated,” he says.

Briefing a joint meeting for the National Assembly’s labour and home affairs portfolio committees, Deputy Director-General of Immigration Jackie McKay, said in August 2011 that in the 2010/2011 financial year 135 000 work permits were issued to foreign nationals. (Monedi promised Moneyweb to provide detailed figures for the last financial year as soon as possible.)

Why not train locally?

Jooste says that the trend of more foreign IT skills being brought into the country clashes with a philosophy of BEE where it would be better to empower people locally, or at least attempt to upskill the currently unemployed demographic.

“The brain drain is going to become progressively worse if we don’t address and stimulate it internally, but rather supplement the need from outside our borders,” he says.

Local banks have admitted to using foreign skills at times, but also said they are committed to training locally.

“We source skills locally and build new skills annually through our academy programme,” Fernando Moreira, CEO of FNB Hogan Technology said. He said that the bank has a very small amount of resources with key skills that are brought in to augment capacity for key projects and that FNB works with professional agencies to manage this process.

Absa also admitted to using Indian companies such as L&T Infotech and Wipro and also with the Barclays Technology Centre India. “Absa’s contracts with these companies stipulate that any on-shore work done by Indian nationals is on the basis that they have valid work permits and other legal documentation,” the bank said. Nedbank said that it uses a variety of partnerships with both local and international companies to provide stable and secure IT infrastructure for its clients. “We continue to invest in the skills development of the ICT sector within South Africa,” Fred Swanepoel, Chief Information Officer at Nedbank, said.

According to Sej Motau, the Democratic Alliance‘s Shadow Minister of Labour, SA does have clear skills mismatch and importing skills is necessary. “Clearly, however, the first priority for our government should be to make sure that before we issue permits to allow people to be imported into the country to work, that we look at what skills we have and what we still need.” He said that it should be a two-pronged approach and that the government should be simultaneously accelerating the development of those needed skills.

Moneyweb did afford Accenture the right of reply to questions about the importation of skills into South Africa, but three months after the initial query (with several follow-up communications including sending this draft article for comment) no reply was received.

Source: Moneyweb

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