Asha Speckman
The business process outsourcing (BPO) sector is expecting 6 000 jobs to be created this year and at least 30 000 over the next five years through an influx of foreign investment.
However, the Labour Relations Amendment Bill, currently a draft document under discussion, is considered a threat to this target.
The bill seeks to better regulate job placement of temporary workers.
Adcorp Holdings labour market analyst Loane Sharp said: “It’s (the bill) going to have a devastating impact. The BPO sector is heavily reliant on labour broking services. The new laws will deem these employees to be permanent.”
He said a spike in labour costs, which typically consumed 50 percent to 70 percent of operating costs, could make the BPO sector unprofitable and an extra rand on the cost per call could drive investors to rival tier two countries such as Egypt, which also had good English and a similar time zone to South Africa, and Mauritius.
“I will even go so far as to say that some South African corporates will start outsourcing offshore. The BPO sector will go in reverse,” Sharp said.
“It’s a fast-growing industry. A lot of us have pinned our hopes for job creation on this industry,” he added.
The sector was also in jeopardy of losing future offshore investment in the wake of the uncertainty over new labour laws, analysts have said.
Ironically this is the sector that the government has prioritised as a key contributor to future job creation in the country.
Sharp said if the bill was passed it could have “devastating” effects on the BPO industry, which was heavily reliant on labour brokers.
Johan Botes, the director of employment law at Cliffe Dekker Hofmeyr, one of the largest local business law firms, said a concern was that the labour market was becoming more rigid.
“The difficulty with the effect of these amendments is should we be looking at protection of those currently in employment at the risk of losing future employment potential for those who do not have jobs? Should we not be looking at creating a flexible labour market?”
Bulelwa Koyana, the interim chief executive of industry body Business Process enabling South Africa (BPeSA), said it was important not to “profess doom” as the amendments might not be tabled by Parliament this year.
She said: “South Africa still has to offer flexible labour laws to be competitive with other countries and for South Africa to grow as an economy.”
Koyana said the industry would tout training in various disciplines, such as finance, to position South Africa as a provider of flexible labour.
She said she expected the emergence of cloud computing, a growing internet-based service that is not location-dependent, to assist growth, while within the government and parastatals there was much scope to outsource, leaving organisations room to focus on their core functions.
According to BPeSA, in the past year the sector contributed about $250 million (R1.7 billion at today’s exchange rates) to the local gross domestic product.
At least five of the top 10 BPO organisations, Teleperformance, Aegis, Sykes, Genpact and Stream, have established offices in the country.
The UK constitutes 56 percent of South Africa’s offshore market. The US, with 17 percent, is the next biggest. South Africa provides voice operations to the UK, US, Australia and Europe.
It also services several international companies including Asda, Shell, Amazon, Lufthansa, Barclays, Microsoft, British Gas, JPMorgan and Virgin Mobile.
A new incentive scheme for employers, announced in December last year and administered by the Department of Trade and Industry, has also helped to drive this interest.
The scheme, which is available to local and foreign employers registered in South Africa and who create 50 jobs within the next three years, pays R112 000 for each full-time job created and maintained.
A sliding bonus of up to 30 percent for more than 800 jobs created is also available.
It is expected to make operating a contact centre or back office operation in South Africa 60 percent to 70 percent less expensive than in the UK and other developed nations.