As countries race to promote BPO (business process outsourcing) as a way of boosting economic growth, South Africa is set to retain a pole position as it ramps up efforts to attract U.S. and European multinational businesses.
Analysts on the continent agree that while the African BPO market is still in its infancy, it is poised to take off especially in South Africa.
“I don’t believe that the industry has gotten off first base. Lots of talk: However, I do believe that 2007 will see SA [South Africa] firmly established,” said Albert Rossouw, who runs the BPO consultancy Strategy360 in Cape Town.
Positive signs, said Rossouw, include establishment of government grants, telephony deregulation, and a concerted effort by the government to maintain favorable rates of exchange between foreign currencies — especially the U.K. pound — and the rand.
Other factors include South Africa’s high-quality environment; accredited training with large unemployed talent pool and its time zone position, which makes it a near-shore destination for the U.K. and Europe — since business hours overlap — and an overnight services provider for the U.S.
The country wants the BPO sector to create 100,000 jobs by 2009, according to Brian Whittaker, chief executive of the Business Trust, a Woodmead, South Africa, company that aims to bringing business and government together in economic development initiatives. About 25,000 of the jobs would be directly involved in BPO, while the rest would be indirectly created by the new business, he said.
Whittaker participated in a recent seminar on outsourcing in South Africa that took place in New York. The seminar was part of a more general marketing effort the country has embarked on, to promote BPO to foreign companies, Whittaker said.
South Africa’s BPO industry employs 80,000 people, but the vast majority are mainly in “captive” centers for national businesses, with, probably, less than 5,000 devoted to foreign businesses, according to Craig Reines, a general manager with TeleTech Holdings Inc., a U.S. outsourcing services provider that is setting up facilities in South Africa. Reines also was at the New York seminar.
There are hurdles to overcome, however.
“South Africa has a very good outlook, the only thing is the high telecommunications rates,” said Peter Ryan, a technology analyst with consultancy Datamonitor PLC.
South African Minister for Trade and Industry Mandisi Mpahlwa addressed the issue at the road show in New York: “I think the telecommunications costs have been the one factor, that if you compare us with India for instance, or the Philippines, we had sort of a distinct disadvantage. But it’s a challenge that we are overcoming in the sense that the costs of telecommunciations are trending downward.”
Though BPO is usually seen to comprise call-center and back-end, data-processing positions, South Africans involved in promoting outsourcing expand the definition to all sorts of IT services, including programming.
“Certainly we are not looking at only call centers,” said Mpahlwa. “We are looking at providing high-end operations in South Africa.”
However, even though telecom costs are decreasing, there are other factors that might limit growth. Among them, according to Rossouw, are government red tape for investors, availability of trained team leaders, lack of business parks and disaster recovery and business continuity facilities.
The government is addressing training issues with its plan, announced earlier in March, to allocate one billion rand, or US$138 million, to subsidize service-provider training for call center and other types of outsourcing work.
And South Africa’s BPO industry has already started to address the need to increase capacity of team leaders. This year, a course designed to address the skills and competency shortfall for middle to senior management levels in the BPO industry took off at the University of Cape Town’s Graduate School.
Though facilities may not equal the capacity already built in other countries, there’s room for growth and the price is right.
“There’s plenty of physical space … rental rates are a fraction of what you find in other emerging markets,” said TeleTech’s Reines.
As long as the government follows its promises for funding and continues to support the various BPO initiatives in place, South Africa will continue to steadily expand in the BPO sector, Reines concluded.
