The future of the business process outsourcing (BPO) sector in the Western Cape is bright, with a number of significant foreign investors from the UK considering South Africa and the Western Cape as an investment destination in 2012, BPO industry association BPeSA Western Cape CEO Gareth Pritchard tells Engineering News.
“These investments form part of a broader provincial government strategy of creating 10 000 offshore-related jobs by 2015, which we are on track to achieve,” he says.
Further, Pritchard predicts that fears of another global recession could drive the growth of the BPO sector this year, as businesses look at innovative ways to cut costs without sacrificing quality.
As outsourcing is seen as a tried and tested model, companies will look to BPO as a way to reduce operational costs in difficult economic times, says Pritchard.
“With increasing pressure on senior management to improve productivity, while still cutting costs, BPO enables organisations to focus on improving core competencies, while secondary functions, such as customer service, are outsourced,” he notes.
In the past decade, the Western Cape has played host to a number of major international brands including oil and gas group Shell and German airliner Lufthansa.
In the past six months, a British utilities company and a well-known UK insurance brand have set up operations in Cape Town and are set to be joined by a globally recognised mobile brand during the first quarter of this year.
One of the major challenges facing the BPO industry in the Western Cape, and worldwide, is the pressure on outsourcing destinations to keep jobs onshore, says Pritchard.
“Since the 2008/9 recession, worldwide unemployment levels have not shown any real sign of improvement, placing further pressure on companies that are offshoring their customer service,” he explains.
A further challenge is the growing number of competitors from first-tier destinations like India and the Philippines, as well as from second-tier competitors, such as Egypt and Ghana, which compete more directly with South Africa.
As this competitive landscape grows, it is critical for the South African BPO industry to continue looking at ways to improve its offering to foreign investors, Pritchard notes.
Meanwhile, South Africa has a large pool of highly skilled agents; however, there is a shortage of quality team leaders, he says.
“BPeSA is aware of this and we are rolling out a new skills strategy, which will include a purpose-built academy specifically for the sector,” he adds.
The biggest opportunity for job creation growth in the BPO industry lies in the offshoring market, says Pritchard.
“The BPO and offshoring industry is a multibillion-dollar sector responsible for hundreds of thousands of jobs worldwide.”
There are local jobs, however, a lot of these are transferred from other provinces thus creating new jobs for the Western Cape specifically, but not necessarily new jobs for the country, Pritchard explains.
Therefore, BPeSA is focusing on attracting new jobs from the offshore market, with a particular focus on the UK, which makes up a majority of the Western Cape’s BPO sector. It is also looking into attracting business from other destinations, such as the US and Australia.
Pritchard believes industry growth can be secured through continued support from the private sector, government, trade bodies, such as the Department of Trade and Industry (DTI), and industry bodies like BPeSA.
SA BPO Proposition
In reaction to the significant growth in the global BPO and offshoring industry over the past decade, South Africa has formulated a competitive value proposition built around five core areas.
The country is typically able to offer source destinations a cost saving of about 50%; however, this figure improves further for investors making use of the DTI’s national incentive scheme, says Pritchard.
This incentive pays investors up to R112 000 per employee for each job created and maintained over a three-year period, lowering the cost of outsourcing from South Africa to about £10 000 a year for each full-time employee.
In the Western Cape, there is also an additional telecoms incentive available, which provides new investors with free telecoms services for their first six months of operation, he adds.
“As telecoms costs form an important part of an investor’s cost basket, this initiative removes a lot of risk for new investors who are deciding whether to set up in the province,” he explains.
Further, the local industry will focus on promoting its domain skills to other countries.
Pritchard says its large pool of personnel with world-class experience in the financial, telecoms and legal domains enhance Cape Town’s mature domestic BPO market.
“Our tertiary education system produces a large number of qualified actuaries, chartered accountants and other specialists each year, while sector-specific programmes in banking and insurance also provide intermediate levels of skill, making the province a competitive service destination for these markets,” he explains.
Meanwhile, South Africa’s large pool of skilled English-speaking individuals to choose from, and rapidly improving telecoms services, both in terms of performance and cost, have further added to South Africa’s standing as a world-class service destination, he says.
The country is also well located to service the European market, given its time zones and its ability to offer cultural affinity to Western markets.
“These factors, combined with our world-class infrastructure, make South Africa and the Western Cape a highly attractive BPO investment destination,” Pritchard states.