ITWeb – December 2009

Three years ago, SA launched the Accelerated and Shared Growth Initiative for SA, which was aimed at halving unemployment and poverty by 2014. One of the key focus areas was BPO, which was seen as a way of encouraging investment in SA and creating jobs.

However, despite government's interest in the sector, SA could miss out on new opportunities if it does not reposition itself.

Frost & Sullivan ICT industry analyst Spiwe Chireka says SA is facing increasing competition from other countries – such as Kenya and Nigeria – that are moving aggressively into the BPO sector.

SA has a $960 million annual BPO industry, which is forecast to grow to $1.9 billion by 2015. But other countries will outpace SA's growth rates. Kenya's BPO market is worth $23 million, and is expected to grow to $89 million in the same period, and Nigeria is at $8.3 million, which is anticipated to shoot up to $114 million.

NO LONGER ENOUGH
Chireka adds that, while the BPO industry can “lap up a large number of SA's low skilled base”, global demand is moving beyond needing entry-level call centre capabilities. And, because the global need is for a higher skills set, “SA's value proposition becomes irrelevant”.

The country has pitched itself offshore as being a good outsourcing destination because of its English language speaking skills, and its time zone proximity to most of Europe.

But, says Chireka, this is no longer enough. She explains that SA needs to specialise in specific sectors, train up the skills base, and market the country better as a BPO destination.

“If they don't get this right in the next year-and-a-half to two years, they will have missed the boat.”

SA should “take a page out of India's book”, she adds. India has set itself up as an IT services destination of choice, and markets itself as such. This has led to it being successful in garnering huge deals, Chireka adds. While it may be difficult for SA to penetrate the European market, there is a huge opportunity for the country to pitch itself to companies that are expanding into Africa, she notes.

GIVE THEM A BREAK
Chireka adds that SA needs to consider offering initiatives such as tax breaks for companies that want to set up a base here.In addition, the Department of Trade and Industry's government assistance and support programme, while an incentive, could be a costly exercise for SA, she says. The initiative was formally launched by the then minister of trade and industry, Mandisi Mpahlwa, in March 2007. It offers incentives to companies to set up call centres in SA, but they must meet certain targets in terms of the number of seats, and the process is long and complicated, Chireka points out.

Johann Kunz, MD of outsourcing company Fusion SA, concurs, saying SA needs a long-term retention strategy. “The provision of further government grants and incentives, in addition to establishment grants and incentives, will ensure we retain BPO organisations in SA.”

He adds that the country needs a “targeted, organised marketing strategy in order to build our image and drive our value proposition”. In addition, SA needs to be more focused with its strategy, and must carve out a specific niche and focus on the higher-end English-speaking sector.

Kunz says the local BPO industry is a stable and emerging one. “However, we have made great progress, specifically in terms of the DTI programmes supporting the progress of this market,” he adds.

While the country is not competitive on a cost basis, he believes South Africa is competitive in terms of cost and quality added into one value proposition, provided it is marketed to the right niche market. In addition, the country has several advantages, Kunz says. He points to its infrastructure, large experienced talent pool with specialised and high-quality English skills, and SA's location, which is favourable to Europe in relation to time zones. “It is easy to see why SA is fast becoming an attractive location option for investors looking to diversify beyond India and the Philippines.”