Posted on 26 January 2011.
By Nicola Mawson, ITWeb senior journalist
The South African (SA) Government’s new incentive scheme is expected to create 30,000 new jobs in the next five years, says Bulelwa Koyana, CEO of Business Process Enabling SA.
New grants to entice foreign companies into SA’s business process outsourcing (BPO) sector are already starting to pay off as new investments are being attracted into the sector.
The Department of Trade and Industry’s (DTI’s) new scheme came into effect this month. It replaces a previous system under which companies could claim for training and infrastructure.
Government’s new incentives will reduce the cost of BPO operations in SA by up to 20%, as investors will be paid R112,000 for each full-time job created and maintained. The incentives will be paid out over a three‑year period, in installments of R40,000 for the first two years and R32,000 in the final year.
The DTI’s new plan replaces the previous Government Assistance and Support (GAS) initiative, which paid out R688 million between July 2007 and March 2010. However, GAS had been criticised because of the amount of red tape involved in accessing the funds.
Local and foreign investors, registered as legal entities in SA, will be eligible for the programme if they create a minimum of 10 jobs.
Bulelwa Koyana, CEO of umbrella industry body Business Process Enabling SA, says the programme is expected to create at least 30,000 new jobs in the next five years. At the moment, SA’s BPO sector employs about 10,000 people.
“Quite a few international investors, mostly from the UK, US, and the Netherlands, have been waiting on the sidelines during this process,” says Koyana. As more investors take advantage of the incentives, about 6,000 jobs should be created this year, she adds.
Kobus van der Westhuizen, VP of Aegis BPO SA, says the programme will flow through to new investment in the sector as it makes SA more globally competitive. With the new scheme in place, SA is at least 50% cheaper than a BPO operation in the UK, for example, he notes.
The government’s new scheme has removed the red tape involved in claiming benefits, comments Van der Westhuizen. As a result, companies are able to factor the reduced cost into their planning, which was not previously the case.
Van der Westhuizen says Aegis SA has already seen interest as a result of the investment, and is currently busy with a project that should create 1,000 jobs. The project has been made possible as a result of the new programme, he points out.
The new incentive scheme of R112,000 per seat is almost double what GAS was able to offer, making SA far more competitive from a global cost perspective, says Koyana.
The programme will run for five years and any three years in the five can be claimed against for incentives. In addition to the per-job incentive, companies that create 400 to 800 offshore jobs will receive a 20% bonus on a once-off basis. This figure increases to 30% if more than 800 jobs are created.