The local call centre industry and government are on a mission to make South Africa the call centre and business process outsourcing destination of choice. Regional and national call centre industry bodies like the South African Contact Centre Community (SACCCOM) are working to build and develop the local industry, and, along with the Department of Trade and Industry (DTI), promoting the country internationally.
Speak to anyone involved in the local call centre and business process outsourcing and off-shoring (BPO) market and you will get a long list of reasons why SA is the perfect destination. From understandable and inoffensive accents, to time zone similarities (with Europe at least), favourable exchange rates and high levels of education, SA has it all. So why does the country still languish along with other tier three destinations (like Indonesia and Pakistan) instead of competing head-on with tier one countries like Ireland and Canada?
Location, location, location
The Merchants 2006 Global Contact Centre Benchmarking report indicates that location is key to managing the cost of call centre operations. Once the decision to offshore is made, and a location selected, skills and staff are the next major considerations. Polling the owners of 363 contact centres in 38 countries, the report states that 34 percent of respondents cited potential cost savings as the reason for off-shoring. On this basis, SA would seem to be a top location - costs are low compared to European destinations, and staff availability and quality are high.UK telecommunications company The Phone House has invested R200 million in call centres in Cape Town and Johannesburg to service its UK TalkTalk broadband business. The Phone House's Wynand Schutte handles the TalkTalk centre in Cape Town.
"An offshore call centre destination has a number of ingredients that are required for it to be successful," he says. "Those ingredients are around infrastructure, telecommunications, IT skills, human resources and management skills.
"There are other issues," he notes, "but those are the main ingredients. If you compare SA on that basis with other tier three destinations like India, the Philippines, Pakistan, Indonesia and Mexico, then we are on a par; we definitely have those ingredients. If you compare SA to tier two destinations like Ireland, Eastern Europe, Australia and Canada, then we are lagging slightly behind."
According to Andrew McNair, GM of the TalkTalk call centre at Merchants in Johannesburg, profile is a challenge.
"Certainly, one would agree that India, closely followed by the Philippines, would be the countries that spring to mind when considering off-shoring options. This, compounded by the clear cost advantages they can offer, suggests to me that South Africa has yet to find its niche in the market."
In other words, SA is cheap but not that cheap when compared to its tier three piers. SA is also not yet on a par with the tier two providers. The news is not all bad, however.
McNair continues: "There is great opportunity ahead, as many Western organisations, having had their fingers burned in India, now consider SA as an alternative option."
Schutte reiterates this sentiment by saying that SA definitely has the right credentials.
"However, the country woke up to this opportunity probably five, six, maybe seven years later than other offshore destinations like India and Indonesia. As such, we are part of the emerging offshore destination market, where India, for example, is far more mature."
Spreading the word
McNair says that South Africa is, indeed, well placed, but requires a concerted marketing effort supported heavily and seriously by the government to raise awareness, particularly of the sector's success stories (for example, the AOL and The Carphone Warehouse accounts).
"While the industry can draw on many strengths, such as convenience for travel, time zone compatibility, Westernised cultural fit and unrivalled customer service, alongside the benefit of tremendous empathy for Africa (an area where India has suffered badly), we do also have to be conscious of the small experience pool from which we draw managers and the consequential spiralling of management overhead costs as fierce competition forces salaries beyond that of their Western peers," he notes.
Schutte also mentions the governmental factor. "BPO, generally speaking, in other destinations has been developed on the back of government intervention. It's recognised as a high value-add economic activity that is actively promoted, and there is government intervention to stimulate it. This is probably an area where SA lags behind slightly," he says.
"It is acknowledged that BPO and call centres have the potential to be huge economic contributors, but the intervention is not yet there. To date, there has been government assistance in the sense that government is marketing SA as a destination, but that's about it."
More please, minister
Ireland's government, as an example, recognised the potential of call centre off-shoring and BPO, as well as other high-value economic activities as early as 1994. In that year, it established the IDA Ireland agency, which has sole responsibility for promoting and developing foreign direct investment.
It had already introduced a 12.5 percent corporate tax rate, which applies to all trading income, in 2003. It has also made available grants for employment, research and development (R&D), training and capital to foreign companies looking to establish operations in the country.
Grants are awarded on an individual basis, with packages being developed specifically per investor.
South Africa's government, by way of the DTI, does make grants available. The foreign investment grant, which could be appropriate for call centre and BPO investors, is, unfortunately, only for manufacturing concerns.
The other grants - for critical infrastructure, skills support and black business supplier development - are also not available to call centre or BPO investors.
That said, the DTI is specifically promoting the call centre/BPO market on its website, has it listed as one of 11 sectors deemed priority sectors, and has a brochure for the sector as part of this promotion (as well as for the chemical and allied industries, and tourism industry). On the other hand, the DTI website still lists MGX as a major local ICT player.
Call centres and BPO were identified by president Thabo Mbeki in his 2006 State of the Nation address as potential high-growth sectors for the economy. They are also mentioned in the Accelerated Shared Growth Initiative for South Africa (Asgisa) brochure and task team report (September 2006).
The report mentions a BPO Government Assistance Scheme, in terms of which 1 000 youth are to be trained under a pilot programme by June 2007, but about which no further information is available. Also mentioned in the report are initiatives aimed at reducing the cost of ICT by developing high-speed national and international broadband. To that end, a Broadband Advisory Council and Local Loop Unbundling Committee has been appointed, and the Nepad Broadband protocol been signed.
Whether any of the above initiatives will bear fruit is hinted at by the fact that the DTI information is at least three years old. The government has only now appointed a Broadband Advisory Council, reducing telecommunications costs has been a priority (in speeches and on paper) for some time, with little action having taken place.
All is not doom and gloom, though. Lack of governmental support notwithstanding, the local market is doing well and attracting business.
According to statistics available on call centre consultants Callrica's website, as at September 2005, South Africa had 535 call centres, over 47 000 seats and 79 000 employees in the sector, with more than 18 of these call centres servicing the international market. A Datamonitor report published in November 2004 estimated that SA could have as many as 939 centres by 2008.
South Africa is still very much a tier three call centre destination, however, and it may need government support to move up a rung on the ladder.