It is not everyday that SA is described as the belle of the ball, but at the influential Birmingham Call Centre Expo, held last month in England, SA was dazzling.
SA had the biggest pavilion at the show and its Team SA presented a picture of a focused, mature industry that is ready and able to handle UK, European and US business.
Team SA is the trade & industry department's initiative to develop call centres (also called contact centres because many use fax, the Internet and e-mail) as an important creator of jobs.
The marketing initiative was launched last year in Birmingham. It is an umbrella organisation comprising a cross-section of service providers, government and Telkom as well as technology, human resources and property companies. Its aim is to promote the country as a hub for global business process outsourcing.
Government is coming to the party in other ways. It is making grants available to international businesses and their service providers, primarily to fund skills development and training.
But the most significant government intervention, says Zoliwe Ntungo, the head of the business process outsourcing (BPO) unit within the trade & industry department, has been the recently announced plan to deregulate SA's telecom industry on February 1 2005. After that date, value-added network providers (Vans) will be able to carry voice traffic over their Internet networks. Until now they've been restricted to carrying data, an already deregulated activity. Prices are expected to fall rapidly in line with those of other low-cost offshore locations.
"Under the terms of the monopoly, SA contact centres have found it hard to compete with international telephony costs offered by other lower-cost locations," says Ntungo. "Despite that, we've been seeing year-on-year growth of 25% in the industry. We expect growth to accelerate dramatically as the effects of deregulation are felt."
The prospect of lower communication costs couldn't have come a moment too soon. Globally, the pressure on companies to cut costs means that the outsourcing of both back-office and front-office functions is assuming a new urgency.
At the same time, those companies that have already outsourced some functions need to manage their risk better. They are investigating other low-cost destinations to complement their existing operations in India. Many of these companies are looking to SA.
SA's call centre industry is mature, with a healthy mix of operations and services. Some companies such as Computer Sciences Corp (CSC), Mindpearl and Global Telesales are focused on the international market; others such as the Dialogue Group have a mix of local and foreign clients; and companies such as Ask Afrika and Directfin Solutions are locally focused.
The complexity of the work undertaken indicates the high degree of sophistication of the industry. A large portion of outbound calls consist of sales, service, data collection and data cleansing, and many of these are international.
"The trend in other offshore locations has been for companies to move back-office work offshore first, then inbound work and last of all outbound," says Luke Mills, the executive director of investment promotion agency CallingtheCape. "SA is following a different model. The fact that international companies have trusted Cape Town with outbound work speaks volumes about the high quality of agents in the market and, in particular, the degree of empathy that can be established between agent and international consumer."
The industry has grown quickly since its inception in 1998. There are about 450 call centres, employing 80 000 people. Recent surveys on the industry by companies such as Deloitte, Radian and Mitial on behalf of provincial and national government bodies suggest that growth rates of 40%/year over the next three years can be expected.
Much of this growth will be driven by the foreign call centre contracts that are expected in increasing numbers.
Already about 10%-15% of SA call volumes represent offshore work. In Cape Town the figure is higher, with outsourcers representing 30% of Cape Town's contact centre and BPO operations (up from 19% a year ago). Deloitte research conducted for CallingtheCape suggests that India's supremacy as the top choice for UK companies locating contact centre and business process operations in lower-cost offshore locations could be challenged.
"Cape Town [and SA as a whole] presents a competitive option, with high quality service, a stable workforce, a robust skills base and a business culture closely aligned to the UK's," says Mills.
SA's labour market is conducive to growth. Salaries, though higher than those in India, are not unreasonable. They are not growing significantly - unlike in India where competition for good call centre resources is beginning to drive up salaries. Also, attrition is significantly lower in SA, says Diane Capazorio, head of call centre staffing solutions at Kelly Personnel. With high unemployment rates among graduates and matriculants, there is no shortage of high-quality staff and experts suggest that the industry could grow by 10 000 seats per year without straining available skills resources.
Another positive is that the industry is more representative that most. On average, black South Africans account for 39% of all managers, 71% of all middle managers and 63% of agents, according to Deloitte.
The industry and government are working in tandem to grow and develop the skills pool through subsidised training and work placements.
This year marked the formation of a professional body called the SA Contact Centre Community (Sacccom). Its aim is to unify the industry behind one comprehensive and co-ordinated strategy to grow and develop the contact centre, BPO and IT-enabled services sector.
At the time of going to press, the CEO and board of directors was being finalised under Sacccom chairman Eddie Funde.
"We found the SA industry had no common vision, no point of contact for government or foreign investors and no sense of its size, strengths and weaknesses," says interim CEO Paul Bacher. "Sacccom was created to remedy this."
One constraint the industry still faces is access to capital. The industry is capital intensive and SA's private equity market has not entered this market. For this reason black-owned call centres are scarce. There are some, such as AbsoluValu, which is 60% black owned. This could change as access to equity becomes easier, says Anton Newbury, CEO of call centre equipment supplier Kathea and an ex-venture capitalist. "There are two niched private equity funds that are being formed to address this market." The funds have not closed yet, but he estimates they will raise about R100m of equity - enough to develop five to eight call centres.
Newbury says if SA's large institutions don't come to the party soon, the US venture capital (VC) industry could seize the opportunity. "There are US-based VC firms that are interested in raising funding to establish call centres here."
SA's call centre industry is potentially on the cusp of big growth. Government, the private sector and labour are on the same page. The marketing message has been honed and streamlined, and the industry body is getting itself organised.
Now it is up to the world to come to the party.
