Call centres: Bringing the world to SA

In the late 1980s and early 1990s, Ireland had a fling with call centres. It seemed to do everything right, putting in place the infrastructure and incentives to make it an attractive destination at a time when globalisation dawned on the world of telephony and geographical location (for call centres at least) became immaterial.

Low corporate tax rates and investments that gave it an educated workforce soon had interested parties sniffing around.

The country then followed through with single-minded determination reminiscent of a bulldog, not letting go of a potential client until it had obtained a commitment.

Ten years later, more than one country is looking back at its example with envy, not least of all SA. No wonder. The jobs created made a significant dent in what was then an unemployment problem, it attracted much needed foreign investment and created a platform for the country to move higher up the food chain.

That is exactly why Ireland is now moving out of the call centre business. These days it is looking at more skilled industries with higher margins and massive future potential.

"Currently Ireland isn`t even looking at call centres," says Angelo Manzoni, director of ICT and electronics at Trade and Investment SA (TISA), a division of the Department of Trade and Industry (DTI). "Their investment agencies have moved on and are looking at software development."

"Ireland is now looking at things like nanotechnology and biotech," says Koffi Kouakou, managing editor of The Industry, a magazine dedicated to call centres.

This leaves room at the bottom for others to do the same, and there are plenty of candidates willing to mop up the scraps dropped from the Irish table. The Philippines is by all accounts mirroring the aggressive attitude that served the Irish so well, and has already won at least one large foreign call centre that could have come to SA. Mauritius is known to have similar plans, with a high literacy rate and good infrastructure to back it up.

Despite some problems with tariffs, we can run a call centre here at 45% of what it would cost in Europe, and that is the entire package.

Rod Jones, call centre consultant,

Yet less than a year ago India was the gorilla with a decent head start in taking over not only most of the international software outsourcing world, but international call centres as well. The experts say a combination of political tension (with the looming possibility of war with Pakistan), poor infrastructure and an overlooked detail of linguistics has put it out of the running, if not for good then for long enough for the other contenders to catch up.

At this stage, if it comes down to a choice between India and SA, most believe the latter a clear winner.

SA no doubt has a lot going for it. Geographically it falls neatly into the same approximate time zone as Western Europe, which means that peak call times are during normal working hours here and the extra expense of paying masses of operators for working the graveyard shift is avoided.

In areas such as Gauteng and the Western Cape, and even throughout much of the rest of the country, all the infrastructure required for a call centre is in place, so much so that it gives the country a clear advantage over India even were India`s political problems solved tomorrow.

"India is going through some strife with Kashmir," Manzoni understates. "The telephone infrastructure and electricity supply is not as dependable as it should be." He cites the example of power outages experienced several times a day during a recent visit to the country.

And even though the rand has come off its lows of December last year, the measure by which it is undervalued and the resulting cheap cost of living and working in SA means a call centre can be run for less than half of what it would cost in Ireland or the Netherlands.

"Despite some problems with tariffs, we can run a call centre here at 45% of what it would cost in Europe, and that is the entire package," says call centre consultant Rod Jones. Others have reported costs of 60% of what could be expected in Europe, but all agree that there are savings to be had in SA.

Those involved say only two hurdles remain: ensuring that hundreds of thousands of skilled operators can be churned out of training establishments to meet demand when the boom comes, and government getting its act together to make international companies an offer they can`t refuse.

No one, inside or outside of the government, doubts that its involvement is the single factor that will determine whether hordes of European companies descend on the country to spend millions on call centres, or whether they turn to the Philippines or another destination.

"Although we as the private sector are saying we will pick up the ball and run with it, we have to have government input, specifically from the DTI and TISA," says Jones.

The DTI couldn`t agree more.

"The industry came to government to ask it to put something in place," says TISA`s Manzoni. "There was a lot of fragmentation. They asked for help and a driver. We took on the challenge."

He says millions have already been spent on projects such as identifying the actual value proposition in SA as a call centre location and in determining the country`s competitiveness compared to the Philippines and elsewhere.

If somebody wants to come in and set up a smelter here there are clear incentives for it, but for a call centre it is not as easy.

Angelo Manzoni, director, TISA

Yet some believe government is not doing nearly enough and may already have cost the country thousands of jobs by moving too slowly.

"They have not done enough, not by a long shot," says Jones. "We are creating between a hundred-thousand and two hundred-thousand jobs here, and the resources the government is putting up in support of call centres are meagre to say the least."

He is especially adamant that the government must market SA as a destination by making it clear to potential investors that there are incentives available for their use. He also wants to see promotional material, good old marketing brochures and the like, that give details of the infrastructure and other draw cards.

Manzoni concedes that tax breaks are not exactly set up to accommodate the services industry in a country traditionally focused on heavy industrial development.

"The incentives that are available are based around qualifying fixed assets, but call centres have little of that," he says. "If somebody wants to come in and set up a smelter here, there are clear incentives for it, but for a call centre it is not as easy [as] there are no incentives."

While consideration is being given to such enticements, he is cautious of something like a low tax rate for an initial number of years, fearing that businesses may simply disappear as soon as the time limit is reached.

"The investor must want to come in almost despite the incentive," he says. "The incentive is a sweetener; we don`t want to sell the house."

Incentives or no, Manzoni says a marketing drive is well underway through several vehicles that government is using to lure foreign investors, such as the SA Vanguard of Technology (Savant) brochure ITWeb previously reported on.

Jones also identifies a lack of information and dependable research on the state, size and potential of the local call centre industry as a deterrent to investors.

However, plans to put this in place are advanced. Manzoni says a report commissioned from UK company Mitial Research and planned to showcase the country through an independent audit is "80% complete". The report is believed to already have put the government more than R1 million out of pocket and is derided by insiders as flawed and inaccurate, potentially even harmful. At the time it was commissioned, it was expected to be published before the beginning of June. Despite the delays, Manzoni says it should be ready within a month and will go a long way towards dispelling uncertainty, or at least to convince wavering investors to come and investigate the country themselves.

Here, the picture is a bit brighter. Despite estimates that the next five years could see 100 000 jobs created through organic growth in the local-to-local call centre industry, and another 100 000 in centres targeted at European and American callers, many agree there will be no shortage of operators to fill those seats.

"We have the labour pool, there is no question about that," says Jones. "We have the training infrastructure in place, the institutions, and they can ramp up very quickly to provide the skills that are needed. We can pump out graduates with all the capabilities."

Many involved in the industry agree, and say there is a pool of talent wanting to be tapped in the form of young matriculants unable to find formal employment. The only problem is to convince them that handling telephone queries can be a viable career.

"Again we need the government to promote the industry as a career," says Jones.

In countries such as Ireland and Holland, government figures show it becoming increasingly difficult for companies to find staff for their centres. It is difficult to believe that this will be the case in SA for some time to come.

Large call centres everywhere are reporting that accents compromise intelligibility.

Michelle Clifford, accent trainer,

However, there is a small group warning that one detail could make it all go awry, the same problem they say started undermining the Indian call centre industry even before its other problems started to manifest themselves. The issue is accent.

"The issue of accent training is very new to this country," says Michelle Clifford, who both practised as a speech therapist and worked as a call centre manager, a combination of experience that convinced her that call centre managers are missing something vital when they only send operators for traditional telephone skills training. She now evangelises accent training through her company Michelle Clifford and Associates.

"There is a huge need for it," she says. "Large call centres everywhere are reporting that accents compromise intelligibility."

For many South Africans, this may seem patently untrue. The country has a reputation for a remarkably neutral-accented English, probably due to the fact that a mishmash of origins and nationalities tend to cancel each other out.

This, however, is only partially true, and even then only of first language speakers. For second and third language English speakers the picture is rather different. The Cape accent may be much loved for its distinctive sound and locals often have no problem with English heavily influenced by Xhosa or Sotho, but the same is not necessarily true of foreigners.

"It is important to note that there is no such thing as unaccented English," Clifford says.

So she and other converts have started offering accent classes that teach a toned-down American accent. Why American?

"It doesn`t matter what accent is acquired as long as it is neutral and understandable for first language English speakers," she says.

American culture is near ubiquitous in English-speaking countries. Americans have also been involved in accent manipulation longer than most, and have the techniques down pat.

The training typically starts with a two-day introductory workshop that does little except explain the accent problem to students and reassure them that they are not being asked to learn a new cultural identity, but only a slightly different way of speaking.

After individual assessment and at least a month of practise, the operator leaves with a new accent, hopefully more understandable to foreign clients. The result: happier clients, happier call centre operator, and with any luck one more company committed to SA.

The numbers vary. Jones believes there is potential for 100 000 jobs to be created in call centres serving local needs, and another 100 000 to be gained from foreign companies.

Manzoni sees 100 000 potential jobs in call centres in the next five years, with a multiplier affect that could see a far greater number of people pulled into the formal economy.

"We can make a dent in the unemployment rate," he says. "The call centre industry is, after tourism, one of the industries that can create the most jobs."

This may seem a tall order, but players say a single American operation moving to SA can take up 5 000 seats in various locations, with around double that number of full-time employees if shift work is taken into consideration.

Not that anybody is quite sure how large the existing market in SA is.

"I believe that it is worth more than R10 billion a year," says Kouakou. "If you look at Telkom, the big banks and other finance companies and the hospitality area, it could come to this. But we can`t confirm this."

The government says it has seen interest from many companies throughout the world in setting up shop locally. Companies are gearing up by building facilities and fine-tuning training programmes.

But perhaps the most heartening are the success stories: Global Telesales which has been handling calls for German airline Lufthansa from Cape Town since 1999, Swiss Air-owned Mindpearl following it early last year and other such as UK-based Active Contact Solutions continuing the trend this year.

We can make a dent in the unemployment rate.

Angelo Manzoni, director, TISA

However, concerns remain that could prevent what Manzoni describes as the "herd mentality" from kicking in to see a stampede of takers. Experts agree those interested must have clear information on issues such as labour regulations and their ability to repatriate assets or profits. The high price of international connectivity must be reduced. And government must provide a framework allowing the country to present a single (and welcoming) face to investors.

The latter has raised some concern as Cape Town and Gauteng vie for call centres. Yet TISA believes there is an opportunity to address this and other issues while also distributing the wealth it expects.

"The idea has been mooted to have call centre parks where you offer preferential rates only inside those parks," says Manzoni. "That will see that you not only have call centres in strong provinces such as the Western Cape, Gauteng and Natal. Call centres are extremely mobile, so it doesn`t matter where we locate them."

And that lies at the heart of the optimism prevalent throughout the local industry. In a world where telecommunications happens at the speed of light, it takes nothing special to run a call centre aimed at customers 10 000km or more away. This is a proven fact. What remains to be seen is if SA can capitalise on its advantages as a European call centre hub.