Despite industry concerns, rising electricity prices will not cripple the business process outsourcing (BPO) sector, says Frost & Sullivan.
While the BPO sector has criticised Eskom's proposed tariff hike, saying it could impede the growth of the sector, ICT industry analyst at Frost & Sullivan, Spiwe Chireka, says power costs are not a critical part of running call centres.
The industry will have to make adjustments to absorb rate hikes and this will likely affect margins, but reduced margins will not result in the death of the sector, Chireka explains.
“The key cost that affects BPO is telecommunications costs. While electricity prices would have an impact on the sector, it will not be do or die,” says Chireka.
The national energy utility company has requested a 35% tariff increase over three years from the National Energy Regulator of SA (Nersa). The state-owned entity also proposed a second option, which would see the 35% hike followed by two consecutive annual increases of 12%.
Nersa is holding national road shows to get public comment on the energy utility's expansion plans. The hearings are expected to end this month and the regulator will then make a decision, which is expected in March.
Still key
Business Process Enabling SA (BPeSA) previously noted the entire industry was already feeling the effects of the credit crunch and even a 10% rise in costs would have a major impact on the sector's success. The industry organisation stated that while SA offered investors high savings potential, Eskom's anticipated hikes would reduce this.
The BPeSA previously said that call centres require a large amount of electrical output to operate. Costs include running computers and other call centre equipment, lighting, cooling systems, 24-hour security protection, multiple backup systems, standby generator and an uninterruptible power supply.
However, the Department of Trade and Industry says that while government is aware of the impact higher electricity prices would have on the industry, the savings potential of the country as an attractive destination would not be lost.
Chireka notes that the size of entry BPO operations will be affected, but that growth in the double digits is still predicted for the sector.
“The rise in power costs may slow down expansion of the sector, but growth is still expected. There will be increased pressure on call centres, but companies will just have to adjust to absorb the changes.”
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