The customer service industry is booming in the Cape of Good Hope. 65% of growth is generated by European customers. In fact, compared with Germany or Great Britain, there is a cost advantage of 70% in the first two years. After two years the cost advantage is still 50%.
South Africa – Business Process Outsourcing Destination 2013
At the end of April 2013, South Africa won the award “Outsourcing Destination 2013” in Amsterdam. This award is assigned by the European Outsourcing Association (EOA). This award reveals the growth of South Africa in the offshoring of call-centre services in recent years. The Western Cape, especially Cape Town, takes a key role in this development. Here, sales growth in the customer service industry has been rising in the double-digit percentage range over the last two years. The industry comprises nearly 40 000 employees by now. European customers are the driving force behind this growth. But what are the reasons behind this success story?
Cape Town – number 1 business process outsourcing capital of South Africa
Cape Town is one of the most multicultural cities in the world. Founded only in 1652, it quickly grew into a hub of the Asia-Europe trade. In a few decades people flocked from southern and central Africa, Europe, and Asia to the Cape of Good Hope. A real melting pot on one of the most beautiful corners of the world was created.
The development history of Cape Town has led to an enormous multilingualism. In addition to English and Afrikaans (related to Dutch) as important official languages, German, French and Portuguese are widely spoken throughout South Africa. This mix of languages benefits the customer service industry immensely. Another important factor is the lack of a significant time difference between Central Europe and South Africa.
Business Process Outsourcing Technology in South Africa
The current boom is also fueling further developments. The bandwidth to South Africa was twenty-fold, and is now at the European level. At the same time, communication costs have fallen by over 90% since 2003, and continue decreasing. Well-known western companies, including Shell and O2 have established their call centre presence in Cape Town.
Through this expansion, call centre service providers of all stripes, especially from Europe, settle in the Cape and bring in modern company structures and technology. In addition, an ongoing support programme of the South African government supports the creation of massive offshore jobs. By the end of 2013 alone a further 2 500 jobs will be created by the call centre industry. By 2015, an estimated 10 000 jobs will be created. The turnover of the industry is now almost 700 million euros per year.
Business Process Outsourcing to South Africa means serious cost savings
The trigger for the shift to South Africa is often traceable cost considerations. 70% of costs can be saved in the first two years compared to European call centres. After the first two years there is still a cost saving of 50% (see chart).
Highly educated foreign language staff forms the base of South Africa’s customer service sector
Quality has also improved; a highly motivated, multilingual workforce forms the basis. Staff turnover is significantly lower than in European locations. As a result, the value of the work content has increased. Mainly simple activities were relocated to the Cape a few years ago. In the meantime priorities have developed in the financial and travel industry, as well as consumer goods and trade.
The rising level of education and language also makes the Cape more interesting as a German call centre operator. In addition to some medium-sized BPOs, two heavyweights are already represented locally by Lufthansa and Germany Amazon. The calls are handled in German or English. The increasing penetration of the English language in recent German population also creates new production alternatives, such as the management of peak loads.
Green light for moving business to Cape Town
The barriers for business relocation to Cape Town are low because the existing international service structure makes building a new structure obsolete. In addition, the Department of Home Affairs contributes favourably to the growth of the Business Process Outsourcing industry in South Africa by facilitating “low-admin” work permit options for foreign nationals. A large number of work permits can be obtained by applying for a corporate work permit for South Africa. Entry by BPOs is often time-limited initially and coordinated through pilot projects. After 6-12 months the long-term decision is usually made to move the business to the Cape.
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