By Sean Goforth, Director of Syndicated Research at Ryan Strategic Advisory
Russia’s invasion of Ukraine began almost a year ago. Outsourcers had to quickly respond. Nations had to decide which side they were on. Within days, a host of African nations including Kenya, Nigeria and Rwanda voted in favor of a UN General Assembly measure condemning Russia for aggression. Another 17 African countries abstained, most notably South Africa.
Now, going a step further in what the government insists is a measure offered to “friends worldwide,” South Africa will host joint military exercises with Russia later this month.
This is hardly the first time that South Africa has claimed the middle ground between competing world powers. The WWII era saw newly independent African nations at the helm of a non-aligned movement amid the ‘my friend, your enemy’ diplomacy of the Cold War.
But this latest diplomatic foray by South Africa poses a problem for outsourcers. The industry depends on economic stability in delivery markets. Frankly, it also relies on a friendly and accommodating orientation toward Western demand markets.
To be clear, the problem is not that South Africa’s government wants to forge its own path in international relations. After all, India likewise abstained from the UN vote to condemn Russia’s invasion of Ukraine.
Rather, in South Africa’s case, the problem is its claims of neutrality are a sideshow. The economy is facing its own unique challenges. Power outages have gone from chronic to commonplace: a record 205 days of rolling blackouts last year has given way to 97 consecutive days of rolling blackouts since October.
That’s bad news anywhere, but South Africa is an outsourcing heavyweight. In early 2022, the results of the Ryan Strategic Advisory Omnibus Survey showed that South Africa tied India as the most-favored outsourcing destination in the world.
Today though, BPO executives face the growing challenge of constant reliance on backup power generation. Their ability to offer work-from-home options is crimped. Meanwhile, BPO executives or their clients who arrive in the country from February 17-27 may well see Russian battleships off the coast. That’s bad optics — and the reputational risk can metastasize.
A large swath of the U.S. public remains supportive of sending military aid to Ukraine, even if partisanship has ensured the level of support is falling after nearly a year. And across Britain, Canada, France, Germany, Australia, Japan, South Korea, the Netherlands and Sweden public opinion strongly backs Ukraine.
Today, consumers in these countries have a magnified awareness of where companies operate, how they manufacture goods, and how they deliver services. They want to spend money with brands whose values and investments reflect their own. Conversely, they show more reluctance to buy from brands with ties that they see as questionable.
In terms of economic clout and democratic credentials, the countries supporting Ukraine are the centerpiece of “the West.” Likewise, consumers in those countries account for the preponderance of demand that outsourcers rely on.
Already, in the cases of Hungary and Serbia, data suggests that friendly winks and nods for Russia’s invasion have caused a drop in foreign investment and higher credit risk. Not to mention Belarus, which essentially has disappeared from the map as an offshore destination thanks to its blind support for Russia.
Yet, a recent policy document by South Africa’s ruling African National Congress blamed Western nations for stirring global tensions (principally through trade sanctions and tariffs). The remedy, according to the document: South Africa should improve ties with Russia and cozy up with the likes of Venezuela, Cuba and Iran. “The ruling party’s policy document this month had the hallmarks of an organization stuck in the cold war era—to the east of the Iron Curtain,” a Bloomberg article noted on January 27.
Purposeful diplomacy is important, especially in times of major war. But diplomatic claims such as South Africa’s ring hollow amid the glad-handing with Moscow. Instead, it is a diversion. The government is trying to regain the limelight in the lead up to a presidential election. All the while, it is leaving the outsourcing community (and their international clients) in the dark.