BPESA reports show that English, German, French, Dutch and Italian are the supporting languages in the market. Which of these might be growing or would you recommend based on demographics (including educational) or immigration trends?
The recommended languages in this group other than English are German, Dutch and French. In the Western Cape in 2011 around 7114 citizens recorded their birth country as Germany (9th) and around 3280 were from the Netherlands (13th). Italy was ranked 19th with 1897 citizens recorded and Portugal was ranked 21st with 1798 (StatsSA: Census data).
The Department of Home Affairs also granted 188 permanent residency permits to Germans (9th largest recipient) in 2013 (65 in 2012 and 263 in 2011). South African permanent residency was also given to 38 Italians and 32 Dutch in 2013 (DHA, 2013). The Department of Home Affairs also granted 2362 temporary residency permits to Germans in 2013, 1050 to the Dutch and 963 to the French (DHA, 2013).
There are also schools in the Western Cape that teach in French and German as well as learning centres that teach foreign languages. The French school completed a R19m investment in 2014 for a pre-primary and primary school campus. The French School in total hosts over 400 students from twenty-eight different nationalities, 41% of the students being non-French among which 25% are South African. The German International School Cape Town offers German-speaking children a Primary and Secondary Education in accordance with German curricula. At Secondary level, the students are taught bilingually according to South African and German curricula.
UCT and Stellenbosch offer training in Dutch, German and French out of those listed above (http://www.westerncape.gov.za/assets/departments/cultural-affairs-sport/language_training_institutes_in_the_western_cape_2.pdf)
The addition of foreign language speakers for specialist language support (German, Swiss German, Flemish, Greek, Swedish, Danish, Italian, Dutch, Spanish, Mandarin and French) and technical or sales support to the critical skills list by the Department of Home Affairs is likely to ease the challenges of securing employees for these foreign languages. This change means that call centres which use any of the languages can secure them abroad and apply for work visas for them.This came into effect in October 2014.
What are your top 3 major areas in Cape Town or recommended areas for potential call center activity?
Cape Town CBD and Periphery (Waterfront/Green Point, Gardens, Woodstock/Salt River)
What are Cape Town's population statistics and overall population, what are the location density patterns in the area? What are 5 year projections?
What are the major industries, what industries would would a contact centre compete with in the market?
The biggest economic sector of the City of Cape Town in 2013 was business services sector contributing ZAR46bn (23% of Cape Town GDP at constant prices), followed by wholesale and retail trade valued at ZAR28bn (14% of Cape Town GDP), finance & insurance accounting for ZAR24bn (12% of GDP), general government contributing ZAR19bn (10% of Cape Town GDP) and communications valued ZAR11bn (6% of Cape Town GDP).
The GDPR of Cape Town (incl CBD and Claremont) reached ZAR66bn in 2013. The biggest economic sector in 2013 was business services sector contributing ZAR18bn (27% of Cape Town GDP at constant prices), followed by wholesale and retail trade valued at ZAR9bn (14% GDP), finance & insurance accounting for ZAR7.8bn (12% of GDP) and general government valued ZAR7bn (10% of GDP)
The GDPR of Milnerton reached ZAR12bn in 2013. The biggest economic sector in Milnerton in 2013 was business services sector contributing ZAR3bn (25% of Milnerton GDP at constant prices), followed by wholesale and retail trade valued at ZAR1.8bn (15% GDP), finance & insurance accounting for ZAR1.6bn (14% of GDP) and communications valued ZAR1.2bn (10% of GDP).
Source: Quantec, 2015
Although the industries mentioned above will compete for human resources, there is a trade off in skills especially in hospitality/tourism and retail. The skills in BPO, retail and hospitality are easily transferrable. Skills development in these industries will compliment the BPO industry.
Please provide the macroeconomic trends & outlook of the recommended locations and include economic dependencies within the next 5 years.
The City of Cape Town contributes to 72.5% of the regional GDP. The City of Cape Town’s Gross Value Added (GVA) at constant 2005 prices has been consistently increasing from 2009 to 2013. The City of Cape Town GDPR growth is forecast to average 3.6% per annum over the forecast period (2012 to 2017). Cape Town GDP grew by 4% from ZAR141bn in 2004 to ZAR195bn in 2013.
Milnerton’s GDP and grew by 6.1% per annum from ZAR7bn in 2004 to ZAR12bn in 2013. Cape Town’s GDP (incl CBD and Claremont) grew by 2.8% per annum from ZAR51bn in 2004 to ZAR66bn in 2013.
The biggest economic sector of the City of Cape Town in 2013 was the finance, insurance, real estate and business services sector, contributing ZAR69.7bn (36% of GDP at constant prices) followed by manufacturing contributing ZAR31.2bn (16%). Over the period 2012 to 2017, the financial and business services sector is forecast to lead the economic growth of the Cape Town region, with real GDPR growth averaging 4.3% per annum. Followed by construction at 4.1% and transport and communication growing at 4%.
Over the period 2013 to 2018, growth in the Western Cape is expected to average 3.6. Over this period, the strongest annual growth is projected for the construction sector at an estimated 5.1% year-on-year. This is on the back of continued expenditure by the public sector on key economic and social infrastructure initiatives. Finance, insurance, real estate and business services is forecast to be the second fastest growing sector over the period 2013 to 2018 growing by 4.6%, followed by transport, storage and communication growing by 4.3%.
(Source: Quantec, 2015, PERO, 2014, MERO, 2013 & StatsSA, 2015)
What have been the currency fluctuations and annual exchange rates over the last 5 years? What are the projected forecasts?
Please describe your current system of government and your when your next elections? What is your current political situation & outlook?
Last year reflected the ongoing ebb and flow of political change across Africa. Seven of the twelve countries that held elections last year witnessed a change of leadership, five of which included the transfer of power from one party to another. The five elections held in Southern Africa were largely free from manipulation and violence. In South Africa, the incumbent ruling party –the African National Congress– was re-elected with an easy majority, allowing Jacob Zuma, to step into his second term in power (Simon Freemantle, political economist Standard Bank, 2015).
South Africa is a constitutional democracy with a three-tier system of government. The next national elections will be held in 2019 with municipal elections held in 2016. Cape Town is a metropolitan municipality, governed by a city council. Council is both a legislative and an executive body, and the Constitution empowers Council to make decisions concerning the exercise of all the powers and the performance of all the functions of the municipality. The City Council comprises 221 councillors, half of who are ward councillors and the other half who are elected on the proportional representation list – according to their political party’s strength.
What are the geo-political risks?
Risks for 2015 are listed as follows:
1) GOVERNANCE FAILURE – despite having strong political institutions, South Africa is struggling from recurrent strikes, which have become the major means of wage setting, and which weaken the outlook for business and raise financing costs.
2) BRICS RELATIONSHIP – SA involvement in BRICS – ANC strong ties with Russia – looks like SA will give expansion of nuclear programme to Russia. President Zuma personally negotiated a September framework agreement with Russia “Nuclear projects are very large and can impact international relationships between the associated countries.”
3) CORRUPTION – The geopolitical risk of increasing corruption has both the highest likelihood and consequence rating for the entire risk profile. South Africa has steadily been performing worse in Transparency International’s Corruption Perceptions Index (CPI), which ranks countries/territories based on how corrupt a country’s public sector is perceived to be. The country is ranked 72nd out of 177 countries surveyed, with a score of 42 out of 100 in the index; this could prove damaging to its reputation. (Transport, Police, Home Affairs etc).
4) SOCIAL STRUCTURAL ISSUES – unemployment rate is around 25%, which translates into approximately 5,2 million unemployed persons.
5) CYBER ATTACKS – over 70% of South African businesses are significantly unprepared for cyber liability risks and are thus considerably underinsured when it comes to managing the financial and legal implications that follow a major cyber breach. South Africa is becoming increasingly exposed to technological risks, especially the escalation in large-scale cyber-attacks coupled with a breakdown of critical information infrastructure and networks.
6) Failure of a major financial mechanism or institution through the events impacting African Bank. Apart from the credit rating downgrade of the four largest South African banks, there are also rising concerns about other lenders.
7) Incidence of data fraud/ theft – leaking of information.
(Source: Institute of Risk Management South Africa, 2015)
What are the natural disaster risks?
Cape Town does not experience any natural disasters with the exception of flooding in low lying areas during the rainy season and wildfires, occurring mainly during the dry season in Cape Town, which can be started both by people and by acts of nature.
The most recent natural disaster in Cape Town was an earthquake on 02 June 1811. Another earthquake occurred on 29 September 1969 between Ceres and Tulbach approximately 100km from Cape Town.
How robust is the public transit system?
Upgrades and revitalized public transport systems are being introduced in key nodes across the province in the Integrated Rapid Transit (IRT) project. The City is collaborating with PRASA (railway), Golden Arrow, and taxi associations to integrate the public transport system. The focus is on a BRT system (MyCiti Bus) which is easily accessible and effective public transport.
The expansion will connect the CBD to the Mitchells Plain and Khayelitsha suburbs by 2014 through to 2015, connecting 75-80% of the entire Cape Town population with the bus service. The BRT project is planned to be complete within 10 years with 100 new buses and 377 stops. In terms of infrastructure 64% of the province’s roads can be categorized as good to very good (Invest in Cape Town, 2014).
What are the current unemployment rates, historical trends and expected steady state rates?
The unemployment rate in South Africa decreased to 24,3% in the fourth quarter of 2014 from 25,4% in the third quarter of 2014. The unemployment rate in South Africa averaged 24,4% from 2008 until 2014, reaching an all-time high of 25,6% in the second quarter of 2011 and a record low of 21,5% in the fourth quarter of 2008 (StatsSA, 2015).
The unemployment rate in the Western Cape decreased to 22,9% in the fourth quarter of 2014 from 23,6% in the third quarter of 2014. The unemployment rate in the Western Cape averaged 21,46% from 2008 until 2014, reaching an all-time high of 24,8% in the third quarter of 2012 and a record low of 16,4% in the fourth quarter of 2008. (StatsSA, 2015).
The unemployment rate in South Africa is reported by the Statistics South Africa.
What is the size of the workforce in the recommended locations? How many are emplotyed in the call center industry today?
What is the current target to total employment for the industry in country? How did you come up with this estimate? How quickly does the government wish to achieve that threshold? How do you propose to sustain these levels of employees? Do you have a pipeline of fresh applicants planned per year? We spoke about this a bit during the visit.
The Government job creation target over the next 5 years in the offshore sector is 15,000, which will bring the total of offshore jobs figure to 40,000. The total employment in the industry (offshore + domestic) is also expected to rise and could reach 250,000 over the next 5 years. The government wishes to sustain these levels of employment through incentivising and funding all the BPO schemes via the Department of Trade and Industry. The government is also committed to skills development through its own initiatives, for example the Monyetla programme, which aims to prepare agents for BPO work.
’It is wonderful to see the extent to which the South African BPO delivery has progressed over the past four years. South Africa has now moved from bordering on onshore-equivalence in 2011 to exceeding onshore capability in complex voice and sales protection & enhancement services in 2015, with LPO now also beginning to kick-in. We have also witnessed the BPO market move from early adoption to the start of the growth curve phase, with the creation of 200,000 jobs a real possibility”
– John Willmott, CEO NelsonHall, 2015
Regarding a pipeline for fresh applicants each year, it is a work in progress, BPESA is currently working on a skills portal to increase the talent pipeline. As part of this the organisation is rolling out a gamification project which will assist in training and educating potential recruits. In addition to this, BPESA is in the process of establishing a public benefit organisation which will function as a vehicle to attract significant funding. This will enable BPESA to build academies in the Western Cape, KwaZulu Natal and Gauteng.
What are the average commute times for people in the industry? What is the typical mode of transportation? Can the government provide better support for overnight workers – can we set up a system that provides BPOs nighttime transportation.
The average commute times for people in the industry is 45 minutes, and typical modes of transport are carpooling, trains, buses and taxi.
Currently there is a need for an industry transport system, this is a work in progress.
What are the labor law hour compliance considerations (minimum wage, overtime pay, final pay requirements, laws surrounding termination, employment contracts, etc…) in the market?
Overtime may only be worked by agreement between employer and employee. As per section 9 of the basic conditions of employment Act, the maximum normal working time for an employee is 45 hours per week. This would mean a maximum of nine hours in any day if the employee works for five days or fewer in a week and eight hours in any day if the employee works on more than five days in a week. The employee has the legal right and entitlement to demand payment for overtime worked at the rate of 1,5 times his normal wage rate, or at whatever rate is applicable (not less favourable than the minimum set in the Act). The employee can also enter into an agreement with the employer whereby he can be given time off work instead of payment for overtime worked
The following may be included as pay on the final pay slip:
Pro-rata leave pay
Notice pay (unless notice worked/resigned/summary dismissal)
Pro-rata bonus (unless discretionary)
Severance pay (at least 1 week per completed year of service).
Notice of Termination
Notice must be given in writing, except when it is given by an illiterate worker. Based on Legislation in Section 37, of the Basic Conditions of Employment Act
|Worker employed for…||Notice Period|
|6 months or less||1 week|
|More than 6 months, but less than 1 year||2 weeks|
|1 year or more||4 weeks *|
* A collective agreement may reduce the 4 week notice period to not less than 2 weeks
What are the call center industry wages (monthly) and benefit loads? What is the estimated average wage? What do wages need to start to recruit for all profiles: Customer service, Technical Support, Sales, Back Office, Email/Chat support
Entry level salaries for customer service agents (monthly):
Please see page 33 of the BPM key indicator report on the following link:
What benefits are typically offered through employers in the market?
Medical Aid, Pension and Bonuses
In addition to base pay, are there other allowances or compensation that are customary, expected, or required by law (i.e. meal or transportation allowances)?
Night allowance for shift work between 6:00pm and 7:00am. The law requires that the company arrange transport for employees working beyond 6:00pm, the cost for this can be covered by the employee, the employer or by both. A joint employee and employer funded model is most common.
How many BPO companies are operating in the recommended locations? How many people do they employ? What type of clients do they support? How many seats do they total?
Are call center employees unionized? What is the threat of this in the next 5 years?
Call centre employees are not currently unionised. We do not foresee this happening in the next 5 years due to various employee wellness programmes introduced by call centres but it remains a possibility in the long term.
What is the average high school graduation rate? What percentage of the population has a high school diploma?, where are foreigners coming from? According to CIA Fact book South Africa has a negative net immigration – where are employees going?
The average high school graduation rate is 75.8%
30.29% of the population in Cape Town have atleast a high school diploma (737,666 have Grade 12 and 395,391 have Higher Education)
(Source: 2011 Census)
What are the colleges and universities in the area? What are the annual graduation rates and volumes by degree type? What are the thoughts of students towards industry, towards US/Europe, what are their motivational factors?
Would job seekers be interested in part-time positions? Are there any labor laws surrounding FT/PT schedules?
There is a large base of high school graduates entering the market on an annual basis with a number of these individuals unemployed. Prior to find full time employment these individuals may look to seasonal/part time work. According to an Adcorp survey in 2012 there are over 600,000 unemployed graduates currently in South Africa.
South African universities generally complete their year during November and reopen in February. During this time learners will also look for employment opportunities.
An independent recruitment company undertook a study to establish the current salary bands and employment status in the call centre industry. The following figure shows the number of respondent companies employing permanent agents, temporary agents and temporary contract agents supplied by agencies – split by province. KwaZulu-Natal employs a much higher ratio of temporary to permanent agents than the other provinces.
It is illegal in South Africa to hire workers in temporary employment for more than three months without justifiable reasons.
Would job seekers be interested in temporary positions? Are there labor laws surrounding severance pay?
In terms of retrenchment, the minimum severance pay is 1 week salary for every completed year of service. Severance packages are normally negotiated between employer and employee. The full statutory retrenchment processes are to be found in section 189 and section 189A of the Labour Relations Act.
What is the current attrition rate in the industry?
28.9% (highest among international outsourcers)
What are the standard and typical recruitment standards in the country? How is recruitment done -Dept. of labor unemployment offices, local internet sites, local print publications, and the current penetration of social media ?
Local internet site, local print publications, referals / word of mouth, recruitment agencies, Career Expos and inhouse recruitment.
No data available on penetration of social media.
What are the most effective recruiting sources in the recommended locations? (newspaper ads, job boards, employee referrals, etc.) Can you please provide # of retirees and military dependents in the recommended locations?
Data on the number of Retirees not available
What are your workers' compensation laws (e.g., mental stress, a compensable injury)
The Compensation for Occupational Injuries and Diseases Amendment Act 67 of 1997 provides for compensation for disablement caused by occupational injuries or diseases sustained or contracted by employees in the course of their employment, or for death resulting from such injuries and diseases; and to provide for matters connected therewith.
Real estate benefit of doing a transaction now vs 5 year from now based on market trends and real estate costs
5 YEAR SCENARIO
TRANSACTION NOW – (Century City – Bridge Park)
Provide a saturation estimate. Currently the population in the Cape Town Metro is about 3,562,000 people. CIA Fact Book shows the work force in the country is about 38.33%. if this holds true for Cape Town as well and the current BPO industry employees 38,000-41,000 persons then the local market Saturation is about 3%. Please confirm
Based on the 2011 Census figure for the labour force in Cape Town of 1,700,187 however more recent date (Stats SA, 2014; QLFS, 2014) puts this figure at 2,000,500 and with the BPO employee figure of 41,000 (per BPESA) the saturation is about 2,04%
Support by the local community i.e. recruitment partnerships, provided government building(s), university support for employee pipeline
BPESA has established strategic partnerships with important stakeholders in the country which include recruitment companies, employee wellness companies, training companies, property companies and even investment companies. Partnerships with Further Education and Training colleges have also been established and partnerships with Universities are still a work in progress.
How expensive is it to rent property in South Africa?
Offices in SA are generally referenced as either “Premium” grade ( P ), “A” grade ( A ), “B” Grade (B ). These can be (currently) explained as follows:
The office rentals applicable to the above building grades are as follows:-
Western Cape/Cape Town
P Grade rentals between R180 – R230/m² per month
A Grade rentals between R120 –R180/m²per month
B Grade rentals between R90 – R110/m² per month
P Grade rentals between R150 – R200/m² per month
A Grade rentals between R120 – R150/m² per month
B Grade rentals between R80 – R110/m² per month
P Grade rentals between R190 -235/m² per month
A Grade rentals between R130 – R185/m² per month
B Grade rentals between R80 – R110/m² per month
Escalation on rentals
8% to 10% per annum
Cape Town R1000 to R1300 per month/reserved single basement bay
Durban R700 to R1000 per month/reserved single basement bay
Johannesburg R500 to R900 per month/reserved basement bay
Guide to cost: Electricity
R18 to R30/m² for office consumption costs
NOTE All figures exclude VAT.