With South Africa’s unemployment figures continuing to rise and the rand remaining weak against the US dollar, it is a good time to explore the investment potential of sectors that could benefit from earning foreign exchange and create jobs for many of the country’s youth.
The unemployment rate in South Africa reached 29% in the second quarter of 2019, up from 27,6% in the first quarter, while the rand continues to hover at around R15 to the dollar.
However, it is not all doom and gloom, according to Andre Schoeman, executive for lines of business at Jasco, who says that given the rand/dollar exchange rate, the country is an attractive market for businesses to invest in the Business Process Outsourcing (BPO) sector as there are opportunities to attract FDI and create employment.
“We need to explore how contact and shared service centres can spur growth from a South Africa perspective, as well as how we can create job opportunities within the BPO sector,” Schoeman says.
He notes that while there is a skills dearth in South Africa – not only in terms of specialised skills, such as engineering, but also in terms of soft skills – this is not a prohibitive factor for the BPO industry.
“Yes, we have a structural problem in terms of skills. We have a lot of youth who are capable, but simply do not have the skills to find employment. But this is something that can be overcome in contact centres,” he says.
Schoeman explains that contact centres can deliver consistency to clients via technology and can provide scripts to agents who do not have to be highly trained to deliver good value, but can be guided to service a client and any gaps can be picked up.
“These employees are already being prompted by the systems that are in place and quality management systems can highlight issues and problems and pinpoint where more training and guidance is needed,” he says.
Schoeman says that one year into a contact centre job, an employee with the ability to deal with people in a business environment has picked up sufficient skills and computer literacy to either continue in the role or move into a customer service role, or they can choose to pursue a completely different career.
“At the end of the day, it’s about setting the individual on a path to proper employment,” he says.
Schoeman adds that not only is this a good way to mitigate the unemployment crisis, most BPO operations are outsourced for companies and are a good source of foreign currency earnings for the country.
“Entrepreneurship does not have to be foreign-based. We could well see a rise of local entrepreneurs, who use local technology and skills to service foreign clients,” he says.
Traci Freeman, head of national operations for BPESA, explains that the body is in a partnership with the Department of Trade and Industry (the dti), as well as a variety of social partners and industry stakeholders, in a bid to secure foreign direct investment and scale the access and development of required skills for the South African GBS sector.
BPESA’s partnership with the dti improves South Africa’s cost competitiveness – relative to source markets and competing countries – which is further boosted by the dti’s GBS incentive programme. This programme provides an incentives for organisations locating their centres in South Africa where they are able to extract real value from investing in the country and automatically facilitating job creation.
BPESA has committed to create 50 000 jobs within the next five years, but Freeman says this figure may double, as the Global Business Services sector has seen 28% year-on-year growth.
Currently, there are more than 250 000 consultants or agents working in the Global Business Sector in South Africa, with approximately 50 000 of these are focused on international business only.
According to Freeman, South Africa has a competitive and compelling value proposition for major English-speaking source markets such as the UK, Australia and North America (USA & Canada) and can offer capabilities that extend across the end-to-end customer journey including both front and back-office service and support.
“While our industry was founded on a strong English language voice capability, companies located in South Africa service a wide range of complex functions, including but not limited to, software development, tech support, education, finance, legal, and HR,” she says.
Freeman explains that the local market is further buoyed by a soft rand, which is appealing to foreign clients for labour arbitrage, as well as by the fact that competing countries, such as India and the Philippines, are becoming increasingly saturated and global clients are considering alternate offshore destinations as part of their risk mitigation processes.
“Investors and clients are looking for alternative geographies from which to service their customers and there has been a very strong interest in South Africa from the international market. We as a collective sector are on a big mission to achieve massive growth in this sector,” she says.
To support global engagement opportunities, BPESA – along with the dti – are hosting their annual Investor Conference and Awards event in Durban, KwaZulu-Natal, in November. The event will see several investors visiting South Africa and getting the opportunity to “touch and feel” the quality offering the country’s GBS sector presents. In addition, investors will engage with local stakeholders and get an opportunity to deep dive into solutions that many of the industry specialists, such as Jasco, have on offer.
South Africa is one of the leading economies in Africa, with well-developed infrastructure and established trade links with the rest of the continent, Freeman says. She adds that while the country is a suitable base for servicing a global customer base, it also provides access to the rest of the growth opportunities the continent is experiencing, which presents additional benefits.