South African BPO industry set for growth in 2011

Gareth Pritchard, CEO of BPeSA
Over the course of the past decade South Africa has developed into a world class BPO & O (Business Process Outsourcing & Offshoring) destination supporting 10,000 offshore related jobs. By 2015 this number is expected to rise to 40,000 making the industry a key socio and economic driver for the country.


One of the driving forces behind this expected development is a new dti (Department of Trade and Industry) incentive scheme, which takes over from the GAS (Government Assistance and Support) programme in January 2011.

South Africa previously offered a 50 – 60% cost arbitrage from source destinations. With the new incentive scheme, operational costs are set to drop by a further 20%.

Currently the average cost per full time employee for a UK company outsourcing to South Africa is £15,000 – £17,000 per year. Once the new incentives are launched in 2011, this figure will drop to £11,500 – £13,500 per year, allowing South Africa to compete more aggressively with other offshoring destinations.

Lower telco costs

South Africa has traditionally been viewed as an expensive telecoms destination, but through continued lobbying there has been significant rate reductions in recent years. From 2003 to 2009 telecom costs fell by 85%, with the cost for an annual telecom line rental/license fee (2Mbps E1) dropping from R2,24,056, to R32,833 per annum.

A continued annual decrease of 15 – 25% is expected over the next five years, further reducing the offshoring cost of South Africa.

Success Stories

The country’s ever improving image has resulted in 5 of the top 10 BPO voice providers setting up operations in South Africa recently.

On the back of the successful hosting of the World Cup 2010, investor confidence is at an all time high and further investment is expected in 2011.

South Africa currently services a number of international companies including; ASDA, Shell, Amazon, Lufthansa, Barclays, Microsoft, British Gas, JP Morgan & Virgin Mobile, affirming the quality of the country’s voice services.

Market focus

At present the UK makes up 56% of SA’s offshoring market, with the USA the next biggest at 17%. South Africa provides voice operations to the UK, USA, Australian and European markets.

Competitive advantages

South Africa has built up a reputation as a quality destination that ensures service excellence at competitive rates; this has been achieved through focus on a number of core service areas.

Government backing

The government has recognised BPO & O as one of the top 3 priority sectors in the Industrial Policy Action Plan (IPAP) and is committed to developing a first-rate offshoring proposition.

Excellent infrastructure

First world infrastructure is available to potential investors in the form of; energy, telecoms, internet and communications.

Large English speaking pool

South Africa produces 345,000 English speaking graduates each year, positioning the country as the third highest English servicing BPO supplier, ahead of Malaysia, Egypt, Kenya, Northern Ireland and Sri Lanka.

World-class financial services

A large pool of financial service graduates are produced each year placing South Africa second only to India in terms of number of financial graduates coming out of BPO & O supplier destinations.

South Africa is also internationally recognised for its high standard of financial reporting. In the World Economic Forum Financial Development Report, South Africa is ranked 1st in strength of auditing and reporting standards.

Other core areas of operation in South Africa include; insurance, healthcare and legal domains.

Back office services

South Africa combines both voice and complex, judgement oriented non-voice BPO processes as part of its core offering.

Traditionally key strengths for non-voice BPO fall within the financial, professional services, legal and actuarial services. Examples of companies who have embraced these offerings include; CSC, JP Morgan, Silica, PruHealth, Underwoods and Eversheds.

Going forward

“The future is bright for the BPO & O sector, with a number of potential large scale investors having shown interest in South Africa as a viable outsourcing destination for 2011,” says Gareth Pritchard, CEO of BPeSA Western Cape.

“South Africa has so much to offer countries looking to outsource both their voice and non voice services and with the continued help of the dti, Provincial and National Government, I am confident we will reach the target of 40,000 jobs by 2015.”

By Gareth Pritchard, CEO of BPeSA