South Africa has been ranked among the top three emerging business process outsourcing (BPO) destinations in the world.
A recent Everest Consultancy survey, undertaken among 340 respondents, found that SA is ranked among the top three outsourcing destinations when established markets such as India and the Philippines are excluded.
BPO was meant to be one of the country's key economic drivers when the Accelerated and Shared Growth Initiative for SA was launched more than five years ago.
The growth plan, which aimed to halve unemployment and poverty by 2014, has since been replaced by the New Growth Plan. This scheme seeks to create five million jobs in the next decade, a target that could be aided by the BPO sector.
However, SA's BPO sector has battled to reach its potential for several years, facing constraints such as rising electricity prices, the high cost of communications, and an insufficient pool of skilled workers.
Cost competitiveness is a key driver for growth in the arena, and was behind the Department of Trade and Industry's incentive plan, launched in January, which will trim operating costs by up to 20%.
Government's incentives will reduce the cost of BPO operations in SA by up to 20%, as investors will be paid R112 000 for each full-time job created and maintained. The incentives will be paid out over a three-year period, in instalments of R40 000 for the first two years and R32 000 in the final year.
The DTI's plan replaced its Government Assistance and Support (GAS) initiative, which paid out R688 million between July 2007 and March 2010. GAS was criticised because of the amount of red tape involved in accessing the funds.
Local and foreign investors, registered as legal entities in SA, will be eligible for the programme if they create a minimum of 10 jobs.
Attractive destination
According to the Everest survey, SA ranks second when it comes to new destinations for off-shoring operations with between 0 and 1 000 seats. Singapore is the top destination in this job category.
The survey excludes India and the Philippines, and focuses on emerging destinations such as South Africa, China, Brazil, Poland, Egypt, Ireland, Morocco, Costa Rico, Mexico and Singapore.
The results of the survey highlight destinations that are most likely to benefit from off-shoring in 2011 and beyond. The results are divided into four specific job categories.
The companies surveyed indicated SA ranks fifth as a destination for companies wanting to set up an enterprise with between 1 000 and 5 000 seats. China is the top ranking destination in this category, 7% ahead of SA.
However, in the 5 000 to 10 000 category, SA is second behind Brazil, and first in the 10 000-plus range, ahead of the South American country.
“Being listed as one of the top three emerging off-shoring locations worldwide is a huge vote of confidence, especially when you consider the quality of service destinations out there,” says Business Process Outsourcing enabling SA Western Cape (BPeSA) CEO Gareth Pritchard. BPeSA is an umbrella body that promotes the interests of the sector.
Pritchard is confident SA will benefit from “substantial off-shoring investment” in the next few years.
Nelson Hall MD John Willmott adds SA's BPO sector will see substantial growth in the next few years, with continued BPO investment from the UK as well as increased interest from Australia and potentially the US.
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