Bulking up the economy
The Western Cape business process outsourcing (BPO) sector is on track to add 10 000 offshore jobs by 2015, and will add about R550 million to the provincial coffers this year.
The Western Cape is SA's biggest hub when it comes to offshoring services, with about half of the market, while the rest is split evenly between Johannesburg and Durban. Currently, the sector employs around 14 000 people, about 6 000 of which are in the Cape.
As a global outsourcing destination, India remains in first place, while SA, the Philippines, and Poland tie for second place. SA currently has an unemployment rate of 25.5%, according to the latest figures released by Statistics SA.
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, with the aim of halving unemployment and poverty by 2014. It has since been replaced with the New Growth Plan, which targets five million jobs by 2021.
However, SA's BPO sector previously battled to aid government's targets as it has faced constraints such as rising electricity prices, the cost of communications, and an insufficient pool of skilled workers.
Business Process enabling SA (BPeSA) Western Cape CEO Gareth Pritchard says the sector is finally making inroads, and is garnering interest from international investors and creating jobs. The Western Cape is growing at 18%, according to BPeSA statistics.
Pritchard says the Western Cape expects to have created 2 300 agent jobs by the end of the year and is on track to reach 10 000 new offshore jobs by 2015. New offshore jobs will add an estimated R550 million to the provincial gross domestic product this year, he adds.
Several new companies recently entered the province, including WNS buying Fusion; Capita acquiring Full Circle, with the aim of creating 1 700 new jobs over the next three years; and Serco's entrance, says Pritchard.
Government's revised incentive programme has generated interest, and grants worth around R184 million have been distributed to 10 projects along with various other subsidies.
The Department of Trade and Industry launched a new incentive scheme last January, which aimed to trim operating costs by up to 20%. Government's incentives mean investors will be paid R112 000 for each full-time job created and maintained.
Local and foreign investors, registered as legal entities in SA, will be eligible for the programme if they create a minimum of 10 jobs.
The plan replaced the department's Government Assistance and Support initiative, which paid out R688 million between July 2007 and March 2010, but was criticised because of the amount of red tape involved in accessing the funds.
Destination of choice
The global IT outsourcing (ITO) market has increased each year since 1989, when global ITO was only a $9-$12 billion market, but is now set to top $290 billion this year, according to a recent London School of Economics (LSE) survey. It notes BPO will pass $175 billion.
The report, Becoming Strategic - South Africa's BPO Service Advantage, by the LSE Outsourcing Unit, was released this month. It took into account a quantitative, comparative analysis of nine competitive countries, using responses from 30 senior global sourcing analysts, as well as detailed interview research with 14 client organisations and providers operating in SA, two potential clients and five market analysts.
Becoming Strategic says all projections indicate that the BPO sector will continue growing over the next five years and should rise by between 8% and 12% a year. Since 2007, SA has been one of the world's upcoming BPO offshore destinations, it says.
"Accelerating growth has seen SA become a 'go-to' destination. Our study finds that this growth is set to continue over the next three years and represents a great opportunity for SA."