SA’s BPO sector tipped to create 775K jobs by 2030

South Africa’s business process outsourcing (BPO) market has the potential to create 775 000 jobs by 2030.

This is according to a report by consultancy firm McKinsey, which notes the South African BPO market still has room to grow.

In the global BPO market, based on the annual Front Office BPO Omnibus Survey, 2020 is the third year in a row that SA has consistently taken second place, straddled in 2020 by two mature sector giants – India in first place and the Philippines in third.

McKinsey notes the nation’s standing as a key BPO player has been reinforced over the last six months.

“While lockdown measures to contain the coronavirus compromised business continuity across the world, South African contact centres were quick to migrate to remote working models and were able to remain operational with minimal disruption for clients,” the consultancy firm says.

It adds that SA’s BPO sector currently employs over 270 000 people in six cities, 65 000 of whom serve international clients.

According to the firm, this total staff base could grow to over 775 000 jobs by 2030, with up to two-thirds of these in the service of overseas markets.

It notes the trend is already under way after Amazon announced in June that it would be hiring 3 000 people in SA this year to support customers in North America and Europe.

“If stakeholders act decisively and strategically, the sector can build on its reputation and the resilience it has demonstrated in recent months and position itself for further growth,” says McKinsey.

It adds that the global BPO industry is valued at $163 billion and is expected to grow to $183 billion by 2023, driven largely by a 7% per annum growth rate in the digitisation and automation-fuelled business process-as-a-service (BPaaS) subsector.

Traditional BPO services, although growing only half as fast, still make up over 70% of industry value and are likely to remain the dominant revenue pool over the next three to five years, says McKinsey.

In SA, it points out that the BPO sector has been a strong performer historically.

“Over the next three years, we expect it to continue to grow at around 3% per annum, in line with global growth rates in the BPO space.”

According to the consultancy firm, the overall South African BPO market is valued at $461 million (R7.8 billion), $272 million (R4.6 billion) of which is attributed to traditional BPO, while BPaaS is valued at $188 million (R3.1 billion).

It notes there are over 100 local and international BPO providers, such as Teleperformance, EXL, WNS and Webhelp, operating in SA.

McKinsey says local players typically serve large multinational customers and deliver clear value by driving lower operational costs and increasing the quality and efficiency of business process delivery.

It adds the solid performance of SA’s BPO sector is due, in part, to the backing it has received from national government.

The Department of Trade, Industry and Competition has been instrumental in increasing the number of full-time equivalents servicing international markets through funding of approximately R1.3 billion between 2007 and 2018, with a further R1.2 billion committed in 2019 for sector support and other operational-improvement support programmes going forward.

Furthermore, the firm notes the BPO industry was given essential service status which ensured that local providers could continue to serve their clients during the lockdown.

The South African BPO industry body, Business Process Enabling South Africa, has also played a key role in aiding the growth of the industry by supporting skills development, sharing best practice, and providing its members with access to other business networks and associations that drive and influence the sector's transition into the digital economy.

“With this support in place and in the context of a growing global industry, our analysis points to the likelihood that the BPO sector in South Africa has not yet realised its full potential. There are two key sources of long-term growth for the industry: scaling services to the international market and aggressively pursuing BPaaS strategies,” the firm says.

It adds that English-speaking countries, including the UK, US, Canada, Australia, New Zealand and Ireland, are key markets for South African BPO providers.

Although these countries are experiencing slower growth than many non-English-speaking markets, says the firm, they still provide a significant opportunity due to the ease of doing business and low regulatory barriers in those countries.

It says South African BPO providers also have experience in serving these markets – 61% of existing offshore business comes from the UK, while the US and Canada combined drive 18%, with another 11% coming from Australia.

“For local BPO players that can tackle the language requirements, non-English-speaking countries like Saudi Arabia, Israel, Thailand, China, Indonesia and Portugal, all provide even more attractive growth prospects – over 10% annually – albeit from a lower base.

“As a BPO location, South Africa has a number of advantages that can be leveraged to attract new business from international markets. BPO providers are more cost competitive than their European and American counterparts, with a fully loaded cost base approximately 11% below the global average.”