South Africa lures BPO investors

9 January 2007

“The BPO sector is not just the flavour of the month, but one which will help to move South Africa further up the value chain and become a knowledge economy,” Deputy President Phumzile Mlambo-Ngcuka told industry leaders in London as the country launched a bid to market itself as an international destination for business process outsourcing.

A high-powered delegation of BPO industry experts from South Africa, led by Mlambo-Ngcuka, presented industry leaders in London with a business case for outsourcing to South Africa at a special seminar at the SA High Commission in London in December.

South Africa’s value proposition
Trade and Industry Minister Mandisi Mpahlwa, in his keynote address on “South Africa’s value proposition for business process outsourcing,” said that while it took time for a developing country to develop a track record, South Africa had more than risen to the challenge.

Go to Reconnect Africa This article was first published by Reconnect Africa, an online careers and business magazine for professional Africans around the world.

“South Africa has the largest economy in Africa, the most industrial development on the continent and the most educational and training institutions,” he said. “We have had 12 years of sound economic management, and we have a growing economy which has yet to realize its full potential.”

With mature and established institutions in the banking, insurance and telecommunications sectors, SA has the business foundation needed for high-value outsourcing opportunities.

The country already has a vibrant BPO industry, with around 70 operations and 80 000 people employed in contact centres and back offices in the major centres.

Centres of excellence Centres of excellence
Reconnect Africa speaks to Mfanu Mfayela, CEO of the SA Contact Centre Community, about why SA is becoming a BPO destination of choice.

Key factors in SA’s favour are its time zone, which falls comfortably within European time zones, as well as its English-language capacity.

“South Africa is not necessarily competing with the cheapest, but it is comparable with many operations in the UK and Europe,” Mpahlwa said. “We can combine superior quality with high cost savings.

“We have a set of distinctive assets, a first call resolution higher than other lower cost destinations and a large, well-educated labour pool.

“We produce 300 000 school leavers and 100 000 graduates a year from world-class universities and we have a low budget deficit, sound infrastructure and the cheapest electricity prices in the world.”

The minister also cited the benefits of South Africa’s highly attractive lifestyle, which has encouraged the immigration of diverse nationalities and communities, offering a range of language capabilities to benefit the BPO sector.

Government incentives
Promoting business process outsourcing in South Africa fits squarely with the Accelerated and Shared Growth Initiative for SA (Asgi-SA), the goverment’s strategy to raise economic growth to 6% and halve poverty and unemployment by 2014.

The government, working closely with the industry, recently developed a five-year plan to strengthen the industry by deepening the talent pool and creating financial incentives for investment.

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“Substantial training assistance, a skills development programme and a learnership scheme will be made available to companies that locate their operations in South Africa,” Mpahlwa told the London seminar. “Companies will get cash grants, tax deductions and the acquisition of work-ready talent.”

On the cost of telecommunications in SA, the minister said that deregulation and promotion of competition was the way to achieve lower prices, adding that a five-year, R30-billion investment by state company Telkom as well as a BPO dispensation on pricing were in the pipeline.

Also addressing the seminar, Deputy President Mlambo-Ngcuka emphasized the government’s programme for “removing entry barriers that we, as government, are responsible for.”

Constraints had been identified in the areas of infrastructure, transport logistics and telecommunications, Mlambo-Ngcuka said. “We are addressing the costs and ensuring that in three to five years, South Africa will not be the same place as today for these services.”

The Deputy President pointed out that while South Africa has a population of 45 million, as a key member of the Southern African Development Community it offers access to a market of 200 million people.

“BPO is not just the flavour of the month,” she said, “but a sector which will help South Africa to move further up the value chain and become a knowledge economy.”

IBM, Shell case studies
The seminar also heard case studies on offshoring in South Africa from representatives of IBM and Shell.

Shell’s case study highlighted the quality of service provided by its operations in South Africa.

“It’s not about cost reduction but about finding good value – although there are also cost benefits,” said Julian Davis, Shell’s programme director for global customer services.

Mteto Nyati, director of global technology services for IBM in South Africa, told the seminar that South Africa was “at the centre of IBM’s new strategy,” which involves creating global shared services and centres of excellence in seven strategic locations around the world.

The company is moving many of the high-value services it provides to its clients – including household names such as Boots and ABN Amro – to South Africa, where it currently employs over 1 500 staff

“South Africa is not a normal call centre location but a highly technical environment where highly skilled people are managing complex IT issues,” Nyati said.

This article was first published by Reconnect Africa, an online careers and business magazine for professional Africans around the world.