Why South Africa’s BPO market has big growth potential | Mark Chana
South Africa has come in second as the most successful business processing outsourcing (BPO) market sector in the world. This is the third consecutive year the annual Front Office BPO Omnibus Survey from McKinsey has put the South African market into this position.
The report says that the BPO market in South Africa has huge growth potential and will be responsible for 775,000 jobs by 2030. South Africa’s BPO market comes behind India and just ahead of the Philippines. This is significant as the other two are much more mature markets and had far more time than South Africa to make inroads.
And the strength of South African BPO has been shored up even more over the last eight months due to the pandemic. Contact centres in South Africa, including CCI South Africa, acted fast to swap to remote working. Our goal was to ensure that our agents and staff stayed safe and our overseas clients continued to be serviced. The sector managed to do this and ensured that minimal operational disruption was imposed on clients.
The BPO sector in South Africa currently employs more than a quarter of a million people, and McKinsey estimates more than half a million more jobs will be created over the next decade. Currently, around 65,000 of the roles within the sector serve overseas clients, and this will rise to close to 500,000 in the next 10 years.
Major businesses recognise South Africa’s BPO potential
Just like a number of Global Blue-Chip companies, Amazon has been quick to move into South Africa as a BPO hub. The multinational hired 3,000 people to services its clients in North America and Europe. To read more about this, see my blog here.
There’s no doubt that the pandemic has boosted our strength as a sector. And now the South African BPO market must capitalise on this growth in reputation and look ahead. The global industry for BPO is valued at $163 billion, which McKinsey projects to increase by $20 billion by 2023.
And the main drivers for this growth is the expected increase in the business process-as-a-service (BPaaS) sub-sector. This is fuelled by digitisation, automation and AI tech. Traditional BPO services are also growing at a different pace, as businesses look to place high-value interactions in good quality geographies, such as South Africa. They currently account for just less than three-quarters of the value of the global industry.
Plenty of scope for potential even during tricky economic conditions
In South Africa, we’ve had a historically strong BPO sector, which is predicted by McKinsey to grow at a rate of approximately 3% per annum. At the moment, the sector is valued at R7.8 billion (equal to $461 million). From this, BPaaS is wort R3.1 million ($188 million) and the traditional BPO services at R4.6 billion.
BPOs based in South Africa are successful because we can deliver high quality customer interactions to both small and large multinational corporations, as BPOs employ and train highly efficient agents and our operational costs are generally lower than first world geographies. We’ve also had significant funding from the Government in South Africa.
The Department of Trade, Industry and Competition has invested around R2.5 billion since 2007, which has gone a long way to boost the sector. And as the BPO sector was officially designated an essential service during lockdown, this meant that we were able to continue to work for our overseas clients.
These different factors combine to demonstrate that South Africa still hasn’t fulfilled its potential in this sector. Two long-term strategic growth plans will ensure the sector does reach this potential over the next few years: incorporating fast-acting BPaaS strategies and scaling the service to more overseas markets, leveraging South Africa’s position in the global BPO market.
