THE call centre, financial accounting, human resources management and IT support industry — collectively called business process outsourcing and offshoring — is one of SA’s fastest-growing economic sectors, according to the Department of Trade and Industry revised industrial policy action plan, released earlier this year.
This is significant in a country with one of the highest unemployment rates in the world — estimated by Statistics SA at 25,3%.
Business process outsourcing is the practice of using a third party contracted to perform specific, specialised processes on a company’s behalf, such as payroll functions, human resources and customer call centres.
The government has long pinpointed business process outsourcing as a high-priority sector, especially since its growth could absorb a “large and well-educated labour pool, with over 300000 new school leavers and 100000 graduates entering the workforce annually”, the document says. The call centre sub sector grew about 8% last year, employing 54000 people.
SA has a big youth unemployment problem, with 2,8-million of its citizens aged 18-24 jobless or in education or training facilities.
SA has made moves to elbow its way into the international tussle for the sector, offering incentives to global giants such as IBM, Fujitsu Siemens, Lufthansa, Virgin, Sykes, Avis, Car Phone Warehouse and Amazon. They have opened customer-service centres in SA.
According to the department, SA is seen as a preferred location for business process outsourcing as the majority of people speak English, the telecommunications infrastructure is improving and labour is fairly cheap compared with the West.
However, concerns have been raised about the potentially exploitative nature of outsourced operations, especially as competition for business increases.
But Garth Strachan, the department’s industrial policy director, says the incentive programme it and the Business Trust offer foreign companies is conditional, with exploitation prohibited.
SA is faced with stiff competition from other developing countries for this sort of business.
India has 63% of the business process outsourcing and offshoring market, commanding 30bn in revenue last year, according to the Indian finance ministry. China announced last month that it will not levy operating taxes on offshore service outsourcing businesses in 21 of its main cities in a bid to attract foreign investors.
In Africa, Rwanda’s 50m IT industry has pushed the Rwanda Development Board to promote the business process outsourcing industry. The board says Rwanda would handle financial accounting and human resource services, catering for nongovernmental organisations (NGOs) operating in the country.
“There are approximately 50 NGOs in the country who would be the key beneficiaries of outsourcing services. NGOs in Rwanda are keen to outsource skills outside their core competencies of relief, education and social development,” says Christine Akuzwe, the board’s investment officer.
Official figures for SA show that Gauteng dominates business processing outsourcing, employing about 35000 people.
In SA, call centres make up two- thirds of the industry, while the remaining part includes financial accounting, IT support, data analytics and an assortment of legal services.
Mteto Nyati, director of global technology services for IBM in SA, said at a seminar on outsourcing that SA was “at the centre of IBM’s new strategy”, which involves creating global shared services and centres of excellence in seven strategic locations around the world. IBM has moved many of the high-value services it provides to clients, including some big names, to SA, where it employs more than 1500 staff.
“SA is not a normal call centre location but a highly technical environment where highly skilled people are managing complex IT issues,” Mr Nyati says.