1. Business Process Outsourcing and Offshoring (BPO)

2. Contents Defining BPO Background: South Africa’s window of opportunity
Gaps South Africa need to address
South Africa’s strengths, weaknesses, opportunities and threats
The actions taken
Sector support programme
Government assistance programme
Talent development
Marketing inititiative
BPO standards
2nd Economy interventions
Telecommunication costs

3. Defining BPO Customer care High end offshoring HR/Administration
Customer support
Collections
Helpdesk
Telesales and telemarketing (Inbound/outbound)
Web sales and marketing other SMA
Customer care
High end offshoring
Engineering
Design
Animation
Network consultancy
HR/Administration
Recruiting and staffing
Hiring administration
Records management
Benefits administration
Payroll services
Business knowledge services
Financial analysis (?)
Database marketing and customer analysis
Biotech research
Other non proprietary research
Credit/debit card services
Check processing
EDI
Other transaction processing
Payment services
Administration/General back-office
Data entry
Document management
Claims processing
Tax management
Asset management
Other (correspondence and report production)
Finance and accounting
Billing services
Accounting transactions
Financial reporting and other
Tax consulting and compliance
Risk management
Treasury/financial management

4. Background: South Africa’s Window of Opportunity
BPO&O global market is expected to grow from $10b to $50-60b by 2008
40-50% of the growth in banking and insurance
Result in an additional 3m jobs worldwide,
k will be contested by SA and other ‘tier 2’ players
SA is well positioned to exploit this opportunity
create k jobs,
attract $90-175m in real FDI,
GDP contribution of %.
substantial positive effect on BEE, SMME and Geographic Equity with respect to job creation

5. Gaps SA needs to address
Talent availability: availability of managerial and agent level talent
Cost of operation: SA is about $7-8/hour/full time equivalent agent costlier than lowest cost centers, (e.g., India, Philippines)
Risk of operation: Perceived issues exist around personnel security and crime rates in SA
Set-up assistance: setup assistance and time required to complete set up requirements
Regulations: Concerns have been raised by companies on the flexibility of the labour regulations.
Third party vendor landscape: Only 4-5 scale players with experience of migrating international business are available in SA today
Marketing activities: Target marketing efforts conducted by provinces are not competitive in scale and sophistication

6. Strengths Weakness Opportunity and Threat Analysis (SWOT)
Cultural and language familiarity
Quality of business infrastructure
Economic and political stability
Quality of life and attractiveness of location
International connectivity
Adaptability
Entrepreneurial culture

7. SWOT Analysis Weaknesses Cost of operations (labour and telecom)
Inadequate government support and investment (e.g. tax, incentives)
Talent gaps (agent and middle management)
Quality and cost of transport
Perceived security risk
Investor relationship management (marketing effectiveness)
Lack of scale vendors
Difficulty of set-up

8. SWOT Analysis Opportunities
Demand surplus in the traditional BPO&O market as India and China face supply bottlenecks
Opportunity to offer specialised services in sophisticated industries (e.g. Financial Services)
A foundation of multi-language skills
A location proposition to regional (Africa-based) players
An alternative location for captive/vendors already present in 1st tier locations e.g., India
Exploitation of country synergies e.g. culture, legal, regulatory
Exploit existing relationships

9. SWOT Analysis
Threats
Pace of delivery against telecom deregulation agenda
Risk of union resistance (cf. atypical employment) and constraining labour regulations (cf. overtime)
Inability to build a strong, coherent industry body
Inability to open up lower cost quality talent pools and build sufficient managerial capacity
Negative perceptions/uncertainty regarding gating criteria and issues such as HIV, BEE and crime
Exchange rate volatility

10. The actions taken
to exploit the opportunity have been largely coordinated through a partnership between the dti and the Business Trust.
under the direction and leadership of His Excellency, the Hon. Minister Mandisi Mpahlwa, MP. (The Minister of Trade and Industry and Director of the Business Trust).
The partnership also include key private and public sector decision-makers, namely:
Ms Thoko Didiza (Minister of Public Works and Director of the Business Trust),
Ms Elizabeth Thabethe (Deputy Minister of Trade and Industry),
Mr Derek Cooper (Chairman of Standard Bank and Director of the Business Trust) and
Mr Eddie Funde (Chairman of the SABC and Chairman of the industry body, Business Process enabling South Africa-BPeSA).
Operations are directed by
Dr. Raymond Ngcobo (Chief Director for Strategic Competitiveness Unit, Enterprise and Industry Development Division of the dti),
Mr. Brian Whittaker (CEO of the Business Trust) and
Mr Mfanu Mfayela (CEO of BPeSA).

11. Sector Support Programme
Five work streams were identified:
Government assistance and Support
Talent development
Marketing
Industry mobilisation
BPO&O standards
Additional work streams have been identified
Telecommunications pricing packages for the BPPO&O sector
BPO 2nd economy strategy

12. GAS Programme Approved in December 2006 by Cabinet
The GAS programme was designed to support the development of the BPO&O sector, through:
Providing incentives to enhance the competitive advantage
Close the cost gap for BPO&O operations when compared to other BPO destinations such as India and Philippines
Address market failures that result in the high cost structure
Approved in December 2006 by Cabinet
Full roll-out in March 2007
The objective of the investment incentive is to attract BPO&O investment that creates employment opportunities.
The grant is provided depending on the value of qualifying investment cost and employment creation.
The grant ranges between R37,000 and R60,000 per seat and is offered to local and foreign investors establishing projects that aim primarily to serve offshore clients.

13. Qualifying Investment Costs Per Seat
Benefits
INVESTMENT GRANT
Employment Created
Qualifying Investment Costs Per Seat
Grant Per Seat
200 – 499
At least R74,000
R37,000 – R44,600
500 >
Greater than R89,200
R44,601 – R60,000
200 >
Less than R74,000
R37,000 - R52,300 or 50% of agents’ salary costs for 2yrs, whichever is lesser

14. Talent Development
The most critical element of a distinctive value proposition – the ultimate basis for competition “TALENT AVAILABILITY”
SA starts with a good foundation of trainable people, however considerable training is needed to deepen the talent pool
There is a need for substantial government investment through
Company specific training and
work readiness training
Work Readiness Programme known as Monyetla is an initiative between the dti and the Department of Labour
aims to take unemployed matriculants or graduates through a process of learning work-readiness skills.
in its pilot phase aiming to train 1000 learners at a cost of R15 000 each
The Training and Skills Support Grant is directed towards the cost of providing company specific training (as opposed to industry wide training) up to a maximum of R12, 000 per agent.
The incentive grant is over and above the assistance obtained through the Sector Education and Training Authorities (SETAs) and is complementary to the BPO&O Investment Grant.

15. Previous and proposed initiatives

16. Previous and proposed initiatives

17. Marketing
To persuade the best companies to do business in S.A. and remain in S.A by:
Understanding and properly communicating the SA Value proposition.
Encouraging regional and industrial diversity
Ensuring a competitive environment ( one stop shop)
Removing Regulatory obstacles
The initiative straddles both targeted and broad-based marketing.  
Targeted marketing focuses on attracting and securing selected high impact foreign investors, who will in turn create a groundswell of other investor interest.
Broad-based marketing encompasses the supporting of government and industry initiatives, to raise South Africa’s BPO&O global profile, with the aim of securing a dominant Tier 2 position.

18. BPO&O Standards
A set of 3 new standards geared towards service quality
Address Inbound and Outbound Contact Centres and Back-Office Processing Operations standards in four categories:
•Leadership and Customer Service Management
•Human Resource Management
•Operations Management
•Technical Resource Management
SA Bureau of Standards (SABS) is now turning these into national standards
ISO is interested in the standards for the first global standard for BPO&O

19. BPO in the 2nd Economy
Need to shift from concentration in main Metropolitan areas (JHB, DBN and CT) to ensure equitable distribution of benefit
New designated areas have been identified to direct some investment to depressed communities
Criteria for selection
Levels of unemployment and poverty
Availability of buildings
BPO potential in terms of local economic development
Availability of ICT Infrastructure
Talent availability and development

20. Identified sites

21. Telecommunication costs
Working with DoC on infrastructure for designated areas/ICT hubs
Negotiating with Telkom for a developmental pricing framework
Large offshore clients (>1000 seats)
Domestic clients
SMME’s
Designated areas
Work is ongoing

22. QUESTIONS ???