SA’s BPO ‘window of opportunity’

15 July 2008

The business process outsourcing and offshoring (BPO&O) industry represents a window of opportunity for South Africa to create jobs and boost economic growth, says Trade and Industry Minister Mandisi Mpahlwa.

Speaking to BuaNews at a national BPO&O conference in Durban last week, Mpahlwa said the industry “provides an opportunity to create many, many jobs for young unemployed South Africans with little effort, because one needs only a basic matric.

“You are able to provide short-term training that will equip them with the basic skills required in, for example, a call centre. In that way you are able to soak up a lot of young people.

“When these young people get these skills and get to work in that environment, they soon develop ideas about other things they can do”, Mpahlwa added. “So very often people, upon developing these ideas, migrate into other fields of employment, and so there is quite a turnover, allowing us to bring people into the industry on a constant basis.”

South Africa’s value proposition

Mpahlwa told delegates at the conference that the BPO industry, which has only been active in South Africa for about a decade, already employs in the region of 100 000 people – yet could employ far more.

“We find that in the Philippines the BPO&O industry has grown from under 40 000 employees in 2004 to over 350 000 today. Yet in many respects we could and should represent a more competitive value proposition.

“This is because we have many attractive features for investors, including existing levels of sophistication in the three BPO focus industry sectors of financial services, insurance and telecommunications, with additional advantages in our quality of talent pool, regulations and infrastructure.”

One of the biggest booms in South Africa’s economy had been felt in the services sector, Mpahlwa said, and the BPO&O industry would work with this sector to contribute to the growth of the economy.

“And, as the cost of telecoms come down, we are becoming more and more competitive.”

Industry poised to grow globally

Globally, he said, the sector is expected to have a value of around US$50-billion in 2008 and to grow by 50% per annum over the next three to four years, creating an additional 3-million direct jobs worldwide.

“However, it is also anticipated that there will be some unmet demand, as existing centres will not be able to maintain or grow their supply for a number of reasons,” including talent and infrastructure “bottlenecks” in traditional BPO centres such as the Philippines.

At the same time, the global increase in prices had forced many companies to cut costs, particularly in the United States, creating an added incentive for businesses to shift certain functions, such as after-sales service and data processing – overseas.

“What this means is that a window of opportunity exists for us to further develop the sector in our country, and to do so as rapidly as possible,” the minister said.

“Certainly the evidence exists that rapid development is possible,” he added, noting that R658-million in investment value had been attracted, and more than 25 000 direct and indirect jobs had been created, since the launch of the government’s BPO&O support programme in 2007.

This programme includes a BPO&O investment incentive comprising an investment grant of between R37 000 and R60 000 per seat, and a Training and Skills Support Grant – to help cover the costs of company-specific training – of up to R12 000 per agent.

Mpahlwa said the department would be looking to raise these incentives further still.

Advantages in rural areas

South Africa’s BPO&O strategy also aims to encourage companies to locate facilities in some of the country’s more far-flung rural areas.

“These areas have abundant labour, a low cost of doing business, as well as existing physical and telecommunications infrastructure,” Mpahlwa told BuaNews, adding: “You will find many of these areas have buildings that are appropriate for the industry but are unused.”

The department had identified 22 municipalities in which BPO&O centres could be located, leaving it up to individual municipalities to “make a case for themselves”.

“We don’t force companies to do this, but we do make available the information, and we have begun to see some successes,” the minister said, with a number of call centres having started up within targeted municipalities in North West province, the Northern Cape, KwaZulu-Natal and Limpopo.

Source: BuaNews