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Tuesday, 15 June 2004

Creating Employment and Economic Wealth Through Developing the South African BPO&O sector

  • Year: 2004
  • Organisation: TIPS
  • Author(s): Kirsten Kennedy

Business process outsourcing and offshoring (BPO&O) is a major global trend, with a significant positive impact in developing countries that have the required skills, cost advantage and infrastructure. Over the next 4-5 years, a window of opportunity exists for South Africa to realize significant value by developing this sector. South Africa has a good starting position with a large and growing domestic BPO market, and strong capabilities in the highest growth sectors (e.g., financial services and insurance) to exploit the international opportunity. Early estimates suggest that a concerted effort could create between 65 000 and 100 000 jobs (15000-25000 direct, 45000- 75000 indirect), attract between $90-175m in cumulative foreign direct investment up to 2008 (in real terms), and result in a GDP contribution of between 0.3-0.5%.

However, to date South Africa has not been able to attract large BPO&O projects, and initiatives aimed at attracting European and US multinationals have been fragmented and largely unsuccessful. This is in marked contrast to the rapid development of the BPO&O industry and the experience of successful players such as India and Philippines, who have rapidly growing business process outsourcing industries, significantly stimulating growth and employment. For example, India is forecasting the creation of approximately 1 million direct jobs from this sector by 2008.

Please Note: The views expressed in this paper represent those of the author, and not necessarily those of The Presidency or ComMark.