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BPO generates R24-billion in revenue in the Western Cape

By Larry Claasen

Business Process Outsourcing  is growing from strength to strength, with 7 900 new jobs bringing in R2.7-billion in foreign revenue in the past financial year.

THE Western Cape Business Process Outsourcing (BPO) sector now contributes as much as tourism to the region’s economy.

The BPO sector employs 70 000 catering to the offshore market in the province. This sees it  contributing R24-billion to the Western Cape economy, meaning that it makes as large a contribution as the tourism sector in terms of economic impact.

The scale of the contribution was revealed at a presentation to the Western Cape Parliament by the province’s Department of Economic Development and Tourism (DEDAT) in November.

BPO is a method of subcontracting various business-related operations like call centre operation to third-party sub-contractors.

National and provincial governments both see the fostering of the BPO sector as a key economic driver, especially when it comes to attracting overseas companies to the country.

The department told parliament that every offshore BPO job in the Western Cape contributes R350 000 of foreign revenue into the province, this includes real estate, cleaners, IT, logistics, and everything that goes with it. 

With offshore BPO operators creating 70 000 jobs in the province, it implied that it contributes around R24-billion into the region’s economy, which made it as large as the tourism sector in terms of economic impact, said Nezaam Joseph, DEDAT chief director kills development and innovation.

The government hopes that the growing BPO sector would dent unemployment in the region.

“The salary packages are around R10 000, but there are roughly about 800 000 unemployed individuals in the province, and half of them have not even completed Matric,” said Joseph.

“The BPO industry allows those individuals to transition into employment, and the cost of R15 000 a job, makes the sector one of the cheapest in absorbing youth into employment.”

Incentive work

The DEDAT said in its annual report 2022/23 that its support programme helped create 7 900 new jobs servicing offshore BPO destinations, bringing in R2.7-billion in foreign revenue.

The sector got a further boost with Minister of Trade, Industry, and Competition, Ebrahim Patel, allocating R569 million in initiatives for this financial year.

Since 2016 the national government has invested R3-billion and has also implemented a Sector Masterplan that drives its growth and development.

The goal of the Masterplan is to create 500 000 jobs in the sector by 2030.

At an industry conference in November, Patel outlined the next phase of the government’s plan to grow the sector. He said it would be focusing on expanding operations across provinces and towns, with a strong emphasis on high-value services in IT, finance, health, legal, and retail.

He noted that the sector addressed the country’s youth unemployment issues in that it was youth-focused, with 90% of employees being young people, and six out of ten employees being women.

“The face of the industry is female and young, which fits in well with our national priorities,” Patel said.

On a growth trajectory 

The sector is broadly expected to maintain its growth over the next few years.

According to the 2023 Front Office CX Omnibus Survey, South Africa is only second to India as a preferred destination for setting up an offshore BPO operation.

“South Africa was the runaway most favored offshore CX delivery point among those surveyed in North America, and the country was very popular among Australian and British respondents,” the report said.

Business consultant group McKinsey & Company said in a 2020 report that the BPO sector in South Africa could grow from 270 000 to 775 000 jobs by 2030, with two-thirds of these jobs servicing overseas markets.

“That trend is already underway: Amazon announced that it would be hiring 3 000 people in South Africa this year to support customers in North America and Europe,” McKinsey said.

Wesgro says over the past four years the country has grown 22% annually. This is twice the global growth rate of the industry, and three times faster than India and the Philippines.

It says South Africa is well placed when it comes to attracting foreign BPO operators, as it has a large pool of good quality, English-speaking talent with high empathy, cultural affinity and niche domain skills. 

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