Outsourcing to South Africa
As companies worldwide respond to increasing cost and efficiency pressures, South Africa is well placed to become a favoured international location for business process outsourcing, including outsourced call centres.
Traditionally, countries such as India and the Philippines have led the way in servicing markets for the United States and Britain, among other countries. South Africa is quickly catching up, however, thanks to a range of factors working in its favour.
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And the government is all for it. President Thabo Mbeki, in his 2006 State of the Nation address to Parliament, identified the call centre industry as one of the high-potential sectors targeted in the government's strategy to boost the country's economic growth rate and create employment.
The strategy aims to make South Africa the world's third-biggest business process outsourcing centre - after India and the Philippines - by 2008.
Calling the
Cape
In February 2006, leading UK telecommunications firm TalkTalk announced plans to spend R200-million setting up two call centres, one in Cape Town and the other in Johannesburg, in the biggest foreign investment yet in South Africa's call centre industry.
According to investment agency Calling the Cape, which facilitated the TalkTalk deal, the body has facilitated call centre deals in the Western Cape worth R933-million since the beginning of 2004, with investments in 2005 up by 19% over 2004.
79% of this investment originated from the UK, with companies from Canada, Germany, the Netherlands and the US also represented.
Companies running call centres in the Western Cape include Barclays, JP Morgan, Lufthansa, the Budget Group, Merchants/Asda, Dialogue and STA Travel.
Call centre numbers expected to double
Research published in November 2004 by independent analysts Datamonitor predicted that South African
call centre numbers would double by 2008 - and rated Cape Town ahead of India for quality of service.
Datamonitor predicted that there would be 939 call centers in South Africa by 2008, almost double the number of 494 in 2003 - a compound annual growth rate of 14% over the period.
It said South Africa offered outsource providers a higher quality, more culturally aligned front-office and back-office location, with labour costs running at about two-thirds of their US or UK equivalents.
These findings were echoed in a report released in 2005 by the Ion Group, which polled many of the UK's top 1 000 companies for their ideal offshore location - and ranked South Africa ahead of India, Mexico and the Philippines.
More competitive advantages
For global firms, South Africa slots in between near-shore locations such as Canada, Mexico or Eastern Europe, which offer close proximity and also cultural affinity to domestic markets, and
more traditional offshore locations, such as India and the Philippines, that offer cheap labour.
Other factors working in the country's favour include the broad base of management and service provider expertise in the local industry, along with the depth of local financial services expertise, particularly in insurance, mortgage and loan processing and collection.
The liberalisation of telecommunications in the country will also lower the costs of investing in call centres in South Africa. Voice over Internet Protocol (VoIP) has begun to be phased in, and the licensing of a second national fixed-line operator - due to start operating by the end of 2006 - will offer competitive price challenges to state company Telkom.
SouthAfrica.info reporter
