South African IT work outsourced to foreign nationals

Evidence has emerged that South African information technology (IT) jobs are being outsourced to foreign nationals, despite the 25 percent unemployment rate in the country.

A Moneyweb report found that this is especially the case within the financial services sector.

“This in spite of ideals – legislated and compliance expected from the private sector – for local empowerment through BBBEE (Broad Based Black Economic Empowerment)” said the report.

The report states large industry players include the on-demand availability of the required skills as well as lower costs as reasons for this trend.

A number of smaller IT companies confirmed the rise in foreign nationals seen coming into the country to fill IT positions. Many of these foreign nationals are said to be from India, although Zimbabwe is also mentioned.

An anonymous source working for a local IT consultancy firm told Moneyweb that while working on a number of financial services projects he has seen “whole floors” occupied by foreign nationals from India who are employed for six months or longer.

“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,” Craig Lithgow, Consulting Director for BlueWare told Moneyweb.

Warren Eiserman, a director at software development and SaaS consulting company Handguns and Tequila, confirmed the financial services sector is experiencing the most off-shore penetration despite suspicion from corporate customers.

Kamal Ramsingh, Deloitte South Africa’s Technology Business Leader, said the reason for this is financial services companies were among the first to accept the offshoring model of IT service delivery. He added the number of Indian nationals in South Africa is increasing due to more multinational companies opening up in the country.

“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,” reads the report.

According to Moneyweb the latest list is dated 2009 and features a few amendments that were published in 2011. These amendments will join scarce skills and exceptional skills work permits into a single category.

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