Why SA industry is NOT doomed

This column is a response from a Citizen reader to yesterday’s column by Andrew Kenny: Is SA industry doomed?

Economic uncertainty seems to be the buzzword on every South African’s lips these days. While individuals review their insurance premiums and take a closer look at their food and travel budgets, businesses, too, are looking for ways to keep the lights on, with the prospect of dwindling international investment hanging over their heads.

The good news is that for many companies, Business Process Outsourcing (BPO) can go a long way toward tightening the corporate belt – without leading to job losses or restricting cash-flow – while precarious markets stabilise and the effects of South Africa’s recent ratings downgrade begin to subside.

With increasing interest from local and international organisations, South Africa’s BPO sector is thriving, and could well prove to be South African businesses’ saving grace when it comes to streamlining operations without downsizing. A report by Deloitte reveals that telecommunications and data services are some of the most commonly outsourced functions, and that South Africa’s struggling rand is making our shores a more attractive prospect for international companies who are intent on cutting costs. And on the local level, the advantages of a strong BPO sector are even more promising. Deloitte’s report asserts that the sector contributes R50 million to South Africa’s annual GDP and provides employment for 215,000 people.

In fact, BPO has been identified as one of the best ways for South Africa to shift its priorities to better suit our economic downturn. So much so that the government has framed BPO as a vital tool against recession, a buffer against the country sliding backwards into even more desperate levels of joblessness and economic stagnation.

Speaking to CNBC Africa at the Business Process Service Action Lab in Johannesburg, Gauteng Premier David Makhura recently extolled the abilities of BPO to help fight unemployment through partnerships between business and government.

“We have a powerful presence of CEOs and BPO companies, many of whom are global companies or local companies with a global footprint. They are already providing back-office services all over the world, and we have 40 such companies here today, led by their most senior representatives. They have made commitments to working with government in promoting Gauteng as a preferred BPO destination, to help address youth unemployment and attract investment in our economy.”

As previously mentioned, communications and contact centres are particularly popular BPO options, helping international companies cut costs and offer better levels of service (Durban is a particularly popular choice with multinationals). On a local level, South African companies can reduce their operating costs, protect their customer-base, and free up precious resources by outsourcing these labour-intensive and time consuming functions to the people that do it best.

And BPO holds far greater potential than just helping business cut costs in tough economic times. Outsourcing certain business processes allow a business to transform their costs from fixed to variable, refocus their resources from peripheral to mission-critical, and improve their competitiveness through innovative enhancements to their customer service.

Companies from every sector are now beginning to see the importance of including BPO in their corporate strategies to help them weather our current economic storm, which threatens to wash even the larger and more established players away.

Andries van Staden is the managing director of Innovation Group South Africa