SA's BPO future is murky

By Siyabonga Africa, ITWeb junior journalist

Johannesburg, 26 Sep 2008

The resignations of President Thabo Mbeki and several Cabinet members may discourage offshore business process outsourcing (BPO) investors, says Datamonitor.

Despite this, SA's BPO industry still has a strong value proposition, according to the independent think tank.

Peter Ryan, Datamonitor's head of contact centre outsourcing analysis, says Mbeki's resignation and 23 September's economic downturn could make BPO firms reconsider existing and future investments in the country.

Mbeki handed in his resignation to the Speaker of Parliament last weekend, after High Court Judge Chris Nicholson linked him to political interference in the prosecution of ANC president Jacob Zuma. Mbeki's resignation was followed by that of several ministers, including finance minister Trevor Manuel, which caused the rand to lose nearly 3% relative to the US dollar. Manuel has since indicated that he will stay.

"While it was anticipated that Mbeki would be replaced in 2009, business confidence among overseas investors is unlikely to be strengthened by what amounts to a bloodless coup by ANC members backing designated presidential candidate Jacob Zuma," says Ryan.

Still hope

Despite the negative market feedback, Ryan insists SA remains a viable location for many offshore functions. "SA's labour pool is substantial, and it remains a low-cost location relative to Western Europe, North America and Australia/New Zealand. There is no doubt that, until the 2009 elections, the potential for instability exists."

The large-scale benefits of the BPO sector have not been lost on opinion leaders and government officials, and few would want to put the sector's long-term development at risk, he adds.

The National BPO Quantification Survey for 2007/8 states there are 1 362 call centres in SA and 911 of them are in Gauteng.

Gauteng in Contact CEO Keryn House says call centres were thought to have generated between 60 000 and 80 000 jobs so far.

House adds the market had seen a downturn on a macroeconomic scale and all industries were affected by the government resignations, not just BPOs.

"There is certainly an amount of positivity with regards to the markets. It would be too early to comment on the current political situation and its impact on the BPO industry," she says.

BMI-T research director Brian Nielson says there is massive potential for BPO in SA, and a location of facilities would be a major draw-card for investors.

Earlier this year, government put in place a R110 million incentive scheme for investors to bring their BPO business into the country. Telkom has agreed, in principle, to provide a reduced pricing scheme for those operations that are based in rural and semi-rural areas.