Incentives to take call centre growth off hold

By: Neal Goldwyer
Published: 23 Mar 07 - 0:00

This month the Department of Trade and Industry (DTI) will launch a number of incentives to encourage foreign corporates to offshore and outsource their business process operations to South Africa. These incentives will also benefit local operators who service international business and are looking to grow their inter- national client base.



National government is committed to market South Africa as an internationally preferred business process outsourcing and offshoring (BPO&O) destination. Customised incentive options are already in place by the City of Johannesburg’s economic development unit (EDU) for companies to establish call centre operations in the new BPO precinct of the city’s central business district. These benefits include reduced prices on property, telecommunications, power, security and transport.



BPO&O is a growing sector in the global economy and emerging markets are becoming increasingly attractive destinations for companies opting to outsource their business support activities to external service providers to administer and manage. The move towards outsourcing globally has been motivated by labour and operational cost savings for the principal company, reducing overheads internally.



The local industry is set to continue this growth trajectory as government and the private sector, supported by the provincial industry associations, play an increasingly active role in securing foreign direct investment (FDI) and implementing programmes to develop and increase local capacity and capability.



“Over the past two years, the industry has shown significant growth with some call centres having grown by more than 50%,” says ContactinGauteng CEO Keryn House.

This is largely a result of investment by Virgin Mobile, Carphone Warehouse, Sykes International, IBM and Call Centre Nucleus. In addition to the 2 000 jobs created in 2006, House estimates that at least 500 more seats will have been created by the end of this month. Research into exact figures is still under way but ContactinGauteng’s general goal is to facilitate hundreds of millions of rands of investment into this industry and secure for the province 60% of an expected 100 000 new jobs for the province. Of these, House explains, 25% will be direct operating positions and the remainder indirect or support jobs for supervisors, trainers, quality controllers, transport, canteen, infrastructure and information technology d�cor providers.



ContactinGauteng is the industry representative organisation and member association in Gauteng responsible for promoting the province as an attractive BPO and contact centre destination. It hosts investors on a weekly basis, showcases opportunities at international conferences and is involved in promoting call centre operation and management as attractive careers.

“For the first time, South Africans are seeing call centres as a good place to work with a reasonable salary. But like any other career, call centre personnel need to be trained and developed,” adds House.



Business processes making up the sector include credit card and cheque processing, accounting, financial, actuarial, property and human resources management services, risk underwriting, asset management administration and technical support, Web design, data management and customer service contact centres.

The call centre industry is a well-established dynamic subindustry of the BPO sector in South Africa’s urban centres of Johannesburg, Cape Town and Durban.

Gauteng, in particular, the city of Johannesburg, has the highest number of call centres in the country employing some 35 000 call centre agents in outsourced and captive (in-house) call centres in information and communication technology (ICT), financial services, banking, tourism, hospitality and business-to-business.



A number of factors highlight South Africa’s attractiveness as a BPO destination. It can provide educated labour at competitive rates. About 15% of agents have a tertiary qualification. Overseas clients consider the South African English accent more neutral and the overall diction and dialect proficiency of staff to be better than some other destinations. Budget Insurance, of the UK, reports savings of 40% on its South Africa-based call centres as operators are competent at handling complex, nonscripted calls. Strategy consulting firm McKinsey indicates local first-call resolution rates of 85% to 95% compared to India’s 66%.

The country also has time zones similar to Europe, some of the cheapest electricity costs in the world, an almost entirely digitalised telecommunications infrastructure, a favourable exchange rate and property rentals 40% to 70% cheaper than most G7 capital cities.



A sector development strategy sponsored by the DTI in conjunction with the Business Trust, which will contribute funding, hopes that the local call centre subsector will benefit from an expected growth from $10-billion to $60-billion by 2009 in the US and the UK BPO&O markets. The DTI sector support strategy estimates that the global outsourcing boom could create 100 000 jobs in South Africa by 2009, provided that appropriate focus, institutional support and targeted government and industry interventions are in place.

Other targets are to create an industry worth $800-million that will attract cumulative FDI of up to $175-million. Research commissioned from McKinsey by the EDU concluded that 50% of these indicators represent accruals to the city of Johannesburg. Gauteng province as a whole generates 34% of the country’s gross domestic product and, despite being the smallest province, it already controls 60% of the country’s call centre operations. “In 2005, there were 360 call centres in Gauteng. In total, there are about 35 000 call centre agents at last count,” explains House.



City of Johannesburg’s David van Niekerk has indicated that development of the inner city as Africa’s future call centre hub is a priority for the EDU. The BPO skills hub is a joint venture between industry stakeholders and Cida City campus aimed at skills development of agents and managers for local call centres.

“The BPO skills hub is the best in the country from the point of view that it is the most generous in terms of skills development incentives. It provides a 50% cost reduction to employers to accredit their agents with an internationally recognised call centre qualification,” comments House.



The introduction of internationally benchmarked standards of best practice for the sector later this year will provide minimum acceptable levels of operation within call centres and other BPO centres. When adopted, they will give South Africa further credibility as being able to deliver a quality offering to international companies needing to ensure that both their service and their customer satisfaction levels can be met.



ContactinGauteng hosted twelve international missions in 2006 and will join DTI Minister Mandisi Mpahlwa in launching the new BPO incentives in four different US cities this month.



“We will also take a variety of steps to improve competition in the economy, besides others, to lower the cost of doing business and promote investment, including practical introduction of the Regu-latory Impact Assessment system, developing high-speed national and international broadband capa-city, finalising the plan to improve the capacity of the rail and port operators, and strengthening the effectiveness of our competition authorities,” said President Thabo Mbeki at the opening of Parliament on February 12, 2007. He added that the Department of Communications (DoC) and Telkom, together with mobile phone companies are finalising plans to tackle call term-ination rates this year.



This goes some way towards tackling the challenges posed by the slow roll-out of broadband up until now in the country, as well as the comparatively high costs thereof. Fixed-line density has also declined somewhat in spite of expectations that dereg- ulation of Telkom’s fixed-line mono-polisation would improve roll-out. The issue of telecommunications costs bears on South Africa’s competitiveness in the global arena of BPO&O, which government, in its Accelerated and Shared Growth Initiative for South Africa, acknowledged as one of three high-priority sectors with economic development and job creation potential.



The DoC hopes that deregulating industry protectionism will improve competitiveness and enable stakeholders to harness ICTs to attain broader economic and social development for South Africa within the context of the global knowledge economy.