The business process outsourcing (BPO) sector's plans to create 30 000 jobs in the next few years, and become the destination of choice, will be undermined if proposed changes to the labour laws go through in their current format.
BPO was highlighted as a key way of growing the economy and creating jobs when SA launched the Accelerated and Shared Growth Initiative for SA more than five years ago.
The growth plan, which aimed to halve unemployment and poverty by 2014, was unsuccessful, and is being 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, government's proposed changes to the current labour regime - including possibly banning labour brokers - may scuttle the sector's aims of creating 30 000 jobs in five years, as it will make SA less attractive than its competitors on the continent.
BPO has been battling 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 recently-launched incentive plan, which will trim operating costs by up to 20%.
Going backwards
The labour laws on the table are currently the topic of discussion at a National Economic Development and Labour Council meeting. Business, labour and government are meeting to find common ground on the new laws.
The Department of Labour has proposed amendments to several labour laws, which would either effectively abolish labour broking, or increase regulation of all temporary employment services. Among the changes is a bid to stop recruitment agencies providing temporary staff.
Bulelwa Koyana, CEO of sector umbrella body Business Process enabling SA (BPeSA), says the amendments, in their current form, will push operating costs up. She believes SA's costs are already high compared to countries such as India and the Philippines.
In addition, the proposed laws will take away the sector's ability to be flexible, she says. Currently, BPO operations can quickly scale up with temporary workers for peak periods. The proposed amendments, Koyana predicts, “will take business away from SA”.
Koyana adds the amendments will almost be enough to cancel out the Department of Trade and Industry's new incentives. She explains the sector is driven by cost-competitiveness, and pushing up the expense of doing business in SA will deter foreign investors.
BPeSA has made submissions on the proposed changes, but has yet to receive any feedback. Koyana hopes sanity will prevail and the final changes to SA's labour laws will be in the best interests of the economy. “There is no way SA won't do what is best for the country.”
Job losses
Aegis BPO Holdings SA senior VP Kobus van der Westhuizen says the proposed laws could also result in permanent jobs being lost if outsourcing providers cannot offer foreign companies the flexibility of temporary workers when they are needed. Cost and flexibility are key growth drivers for the sector, he adds.
Van der Westhuizen believes the laws will “cannibalise” government's proposed job creation plan, and the DTI's incentives. Key competitors such as Egypt, Kenya and Ghana have a more flexible labour environment than SA, he comments.
The BPO sector has low barriers to job entry, Van der Westhuizen explains, and a temporary workforce receives job training that can be used to their benefit. However, he is in favour of the labour broking market being cleaned up, and sweatshops being removed.
Aegis expects about half of its growth in the next two to three years to come from foreign investment, which would be threatened if the laws go through in their current format, says Van der Westhuizen.
As a result of the pending changes, Aegis's Indian head office has put its R500 million investment plan on hold until there is clarity on the amendments, he says. Aegis has invested around R300 million in SA, but the balance has yet to be spent.
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