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A week ago, I called my local service provider and instead of hearing a friendly voice on the other end, I was greeted by an artificial intelligence (AI) assistant ready to help me with my queries.

No waiting on hold, no repetitive explanations, just efficient and accurate responses. It's like having a tech-savvy companion who's always there to help. Welcome to the future of customer service!

This is just one example of how the business process outsourcing (BPO) industry (also known in the industry as GBS – Global Business Services) has evolved over the past few years. Services are not only being outsourced to humans but to robots as well.

The business process outsourcing (BPO) industry is growing globally and South Africa is well placed to benefit economically.

It’s important to note that while AI can handle a wide range of queries, there may be complex or unique situations where the human touch is irreplaceable. 

When all the efficient AI options have been exhausted, I am comforted to know there is always an option to speak to a human consultant in the array of options provided, ready to provide that personalised assistance we sometimes need. 

It’s the perfect blend of technology and human connection that ensures the best customer experience possible.

Why SA is becoming a BPO hub

The global BPO industry has been on an upward trajectory, with South Africa emerging as a key player due to its unique value proposition.

The global BPO market is evolving rapidly, driven by technological advancements such as automation, AI, and cloud computing. These technologies enable BPO providers to deliver services more efficiently and to expand their offerings. 

South Africa has become a hub for BPO activities, thanks to its significant cost savings and skilled English-speaking workforce, as well as its favourable time zone, which aligns with key European and Middle Eastern markets.

The sector's expansion is proving to be a boon for South Africa's economy, for many reasons, as expanded on further below. But first, some background on the BPO industry.

What is a BPO?

The BPO function is pivotal in allowing businesses to outsource routine tasks, thus reallocating resources towards strategic initiatives that bolster competitive advantage. Typical examples include contact centres (often known as call centres), IT and software development, and payroll and human resources management.

19,307
jobs created in 2023
USD309m
export revenue

Investment into South Africa’s BPO sector

In South Africa's case, the BPO sector has been instrumental in job creation, attracting foreign direct investment and promoting economic growth. The government's support has been evident through incentives and infrastructure development, aligning with national economic growth strategies, such as the National Development Plan.

Foreign investors entering the BPO market in South Africa have helped to address the country’s challenges and continue to contribute to its economic development. 

According to the GBS Sector Job Creation Report: Q3 October to December 2023, to date the BPO sector has created c.112,441 jobs since 2015, generating USD1,8 billion in export revenue. 

The sector has attracted a significant amount of capital resulting in a 41% expansion of the BPO industry over the past 10 years. 

In 2023 19,307 jobs were created, generating export revenue of USD309m, with the sector chasing an audacious target of creating 20,499 jobs annually.

Do the rewards outweigh the risks?

With this immense potential comes some concerns, however. One worry is the dependency the sector may have on foreign investors, which may limit local control over the industry and economic development. 

Additionally, the repatriation of profits by foreign investors could reduce the overall economic impact and benefits for South Africa. 

There are also worries about potential wage suppression in the BPO sector, leading to lower living standards for workers and increased income inequality. 

Lastly, local BPO companies may face challenges competing with the resources and expertise offered by foreign investors. 

Despite these concerns, South Africa has secured its position as a preferred BPO destination, offering between 60% and 70% cost savings compared to Australia, the UK, and the US, and competitive operational costs that rival India and the Philippines. 

In addition, South Africa’s BPO industry boasts an 18% higher customer experience satisfaction rating than its peers, contributing to greater customer lifetime value, according to the 2024 South Africa ITO Value Proposition.

According to BPESA and Genesis Global Business Services, the South African workforce is a key asset for BPO companies seeking to establish BPO operations in South Africa, with a 96% multi-ethnic composition, including 89% youth and 65% female employees. 

This diverse talent pool is proficient in English, with a neutral accent and high emotional intelligence, aligning closely with Western cultures, particularly the UK and the US. 

Cape Town and Durban have outshone Johannesburg as BPO hubs due to their lower operating costs and higher relative English proficiency. These cities offer a blend of affordability, talent, and quality of life, making them attractive for BPO operations.

Key sectors and growth factors

When analysing the 2023 year, the utilities & energy industry (31,57%) insurance industry (24,68%) retail & eCommerce industry (15,52%) and telecoms (10,64%) were the largest international vertical industries serviced from South Africa during the year according to the BPESA GBS Sector Job Creation Report. 

The finance and healthcare sectors are also expanding their BPO services, demonstrating the industry's versatility.

To continue positioning South Africa as a leading BPO destination, South Africa needs to invest in infrastructure, specialised skills, promote innovation, and maintain a business-friendly environment. Marketing South Africa's advantages, such as time zone compatibility and cultural affinity, is also crucial.

Beyond the industry-specific factors, BPOs in South Africa also face challenges such as economic and political stability, regulatory compliance, technology advancements, talent acquisition, power and other infrastructure constraints, logistics challenges and data privacy. Addressing these concerns, as a country, will be essential to sustain growth and attract international BPOs.

BPESA, the industry body for BPOs in South Africa, has been instrumental in promoting the sector. It advocates for the industry, drives skills development to ensure South Africa remains a globally competitive BPO location.

South Africa's BPO sector is a vibrant and critical component of the nation's economy, offering substantial benefits and opportunities for growth. With continued focus and strategic initiatives, South Africa can solidify its reputation as a global BPO powerhouse.