SA's BPO sector under threat

Nicola Mawson
By Nicola Mawson, Contributor.
Johannesburg, 25 Oct 2010

SA's business process outsourcing (BPO) sector will see its competitive advantage wiped out in the next five to seven years, if measures are not put in place now to trim money wasted on unproductive call centre agents.

BPO was identified several years ago as a key growth driver to create jobs and aid the country in boosting economic growth. However, SA has not met its job-creation targets, despite government's high expectations of the sector.

Recent research by the Everest Research Institute found SA's contact industry employs 200 000 people, but has only created 9 000 jobs through attracting foreign investments. This figure is below that of Morocco, with 31 000; Egypt, with 14 000; and Mauritius, with 10 000. Labour costs account for as much as 60% of the cost of a call centre.

However, Everest also found that local call centre agents cost between 20% and 30% more than those in other African competitors. The research, commissioned by Business Trust, looked at the sector during the last year and the report is set to be released this week.

Wasted money

Patrick Coleman, CEO of Customer Service Engineering (CSE), argues that, because productivity is not uniformly measured across the sector, call centres in SA employ up to 50% more staff than is required. He says SA has to be more productive to compete and offset the higher staff costs.

“As a result of ineffective use, or lack of use, of measurement tools, many contact centres in SA use between 30% to 50% more staff than they require, costing companies more money, while achieving poor customer service levels,” he explains.

Coleman says far fewer companies in SA monitor productivity, compared with other countries. In the US and Europe, for example, between 70% and 80% of companies monitor work outputs. CSE research estimates that 20% to 30% of local firms are equipped to actively monitor productivity.

“To be able to compete on a global level, there's a need for South African companies to start prioritising performance, and make use of global measurement tools and innovative processes to ensure the success of BPO and contact centre operations,” says Coleman.

Dwindling advantage

Frost & Sullivan ICT industry analyst Spiwe Chireka says: “SA is more expensive that our African peers that are entering the BPO sector.” She notes that the country has to justify the higher cost.

Chireka says SA does have several advantages, because it is a mature market, and can offer expertise in niche areas, a cultural affinity with Europe, and an ability to communicate in several languages.

However, she points out that other emerging markets, such as Kenya, are fast catching up. “Kenya will give SA a run for its money in the next five to seven years.” Kenya, SA's largest competitor on the continent, is benefiting from government investment and is maturing fast, she explains.

“It all comes down to cost; if another country can do the same as SA, SA has a problem.” Chireka says SA's competitive advantage will be wiped out in the next five to seven years unless all stakeholders join forces to grow the market.

Chris Gilmour, Absa Investments analyst, says: “We are not competitive when it comes to salaries in this country.” He adds that SA also needs to focus on developing skills as “our skills base is nothing like it should be”.

Gilmour says SA's BPO skills have not grown to the level they should be at, despite several government programmes aimed at the sector. “It's all very well to have acronyms, but we need to see more tangible evidence that is impacting out skills base.”

Still hope

Bulelwa Koyana, interim CEO of umbrella body Business Process enabling SA (BPeSA), says SA is more expensive than other African competitors.

However, it is not too late for SA's BPO sector, she says, and much work is being done in conjunction with the services Sector Education and Training Authority to 'professionalise' the sector in terms of training and work standards.

In addition, says Koyana, there are several initiatives under way to spur growth in the sector. Among these is a trade and industry incentive that is in the works. This incentive would look at trimming the cost base so that SA can narrow the gap.

Koyana concedes that SA has not lived up to its potential, creating only 9 000 jobs through foreign investment, instead of the 2010 target of 25 000. However, she says, the sector wants to double the number of jobs created by foreign investment in the next four years.

In addition, SA's BPO sector is focusing on attracting investment from the UK, Netherlands and sub-Saharan Africa.

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