Following a route forged by India and the Philippines, countries throughout Africa are trying to become competitive destinations for business process outsourcing by promoting low-cost labor and fostering conditions for a build-up of IT infrastructure.
Within the last quarter, there has been considerable movement in the BPO sector on the continent. For instance, East Africa just made an entry to the BPO sector with the launch of KenCall EPZ, Kenya's first international call center. Mauritius is consolidating its plan to convert the country into a cyber island, with the ongoing construction of a second cyber tower in Ebène that will host BPO operators, and preparation for a second cyber park at Rose Belle.
The bulk of Africa's BPO activity is presently concentrated in two areas - the southern and northern regions of the continent, though countries throughout the continent, such as Ghana and Senegal, are also trying to build up BPO activity.
South Africa leads Africa's BPO sector; performing call center services and all types of back office operations, according to Peter Ryan, a call center analyst for Datamonitor, which provides a barometer for BPO activity on the African continent.
In North Africa, Egypt is by far the best equipped to perform all aspects of BPO, according to industry insiders. Morocco has some activity in the call center arena, while Tunisia has the least amount of BPO activity in North Africa.
Xceed Contact Center is a call center that employs 850 people and has been operating in Egypt since 2001. According to Ossama Nazmi, Xceed's business development manager, there were several reasons why the company decided to locate in Egypt.
A major issue was Egypt's wage rate. Nazmi said via e-mail that Egypt's wage rate is more competitive than nearly all offshore locations including Canada, Mexico, Poland and Hungary. "Only one other offshore market is as competitive as Egypt's rate, of 54% of the cost of a U.S. customer care agent," said Nazmi. The other market is Hungary, he added.
Nazmi also catalogued other competitive advantages, such as multilingual capabilities; and several big post-secondary-school institutions located in Egypt are funded by foreign governments, including the U.S., Canada, France and Germany, all of which produce many multilingual graduates, Nazmi said.
Egypt has the workforce to feed the call centers. More than 200,000 graduate from universities in Egypt every year, 40 percent of which are in the field of information technology.
In addition, Egypt has a prime geographical location (centrally situated between the U.S., Europe and Asia), and the time difference with other countries allow it to cater to multiple regions.
Other factors that made Egypt a preferred destination for Xceed were the country's business culture. Its workforce is accustomed to using the same goods and services found in Western countries, due to its proximity to Western Europe and long-established trade links. The Egyptian government actively supports the industry through various incentives, and gross domestic product growth and inflation are at sustainable and constant levels.
The Egyptian government is using a four-pronged approach to attract BPO companies: tax breaks; competitive telecommunications rates; training funds; and marketing aid. For instance, telecom rates are as low as 7 cents and 5 cents per minute to Western Europe and North America, respectively. International 2M bit/sec circuits (E1 circuits) can be rented at $3,800 per month. Tax breaks can last from five to 10 years for contact centers.
South Africa is also using a tax-break strategy.
"Companies can claim back around 20% to 30% of capex (capital expenditure) costs in a cash grant paid out over three years. Companies can also effectively claim back a portion (up to 30 percent) of training costs," said Luke Mills, executive director of CallingtheCape via e-mail.
CallingtheCape is a nonprofit agency dedicated to the development of the contact center and business process outsourcing industry in Cape Town, South Africa.
According to Mills, U.K and U.S. companies are finding that they can achieve substantially the same customer experience and levels of customer satisfaction in South Africa as in the U.K., but at a reduced cost - on average, a 30% savings.
"This is driven by the people: the fact that agents are first-language English speakers with a high degree of cultural alignment to Western countries, agents tend to be more experienced and similar in age and outlook to agents in the U.K. or U.S., staff attrition is low so expertise is built up over time and not lost, and this is complemented by a similar time zone to Europe and a shared business culture; this is predominantly the same for both voice and data processing work, although the key strengths apply more to voice than to data and this is where we are seeing the strongest growth - particularly for complex unscripted calls," said Mills, enumerating the factors that make South Africa a competitive destination.
In the same region, Mauritius is aggressively pursuing its vision of making the island a major BPO destination on the continent. It presently has 23 operators in its Ebène Cyber Tower with a second tower under way.
Although Mauritius has ambitious programs to make BPO a pillar of the economy, DataMonitor's Ryan doubts that Mauritius can take a sizeable market share in the sector. He reasons that Mauritius has a small population -- just a little more than a million -- compared to South Africa's population of 44.8 million, and may find it difficult to raise the human resources for big call centers.
Other countries in the South African region like Botswana are making a huge push to attract investment in the BPO sector, offering solid packages. Botswana, for example, offers a guaranteed corporate tax of 15% until June 2020.
Although Ryan forecasts that there will be growth in BPO on the African continent, especially in the call center market - mainly because of rising costs in traditional BPO countries - India and Philippines will retain the lion's share of the market.
This story, "African countries set sights on BPO market" was originally published by IDG News Service .