South Africa’s New Labor Bill To Stall BPO Industry

March 22, 2011

South Africa is expecting its BPO sector to add another six thousand jobs in 2011. This translates to about 30, 000 new jobs in a period of five years and all this is expected to come from foreign investment.

But it appears that there might be some proposed laws that might get in the way of these projected figures. The Labor Relations Amendment Bill which is under discussion by the South African government would hamper growth in the BPO sector, experts say.

Loane Sharp who is an analyst at Adcorp Holdings labor market told IOL Business Report, “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.”

This would increase labor costs, which are roughly 50% of all operational costs and this itself could just make business process outsourcing downright unprofitable. In addition, an increase in the cost per call may push investors to neighboring rivals like Egypt and Mauritius. However, Egypt will take some time to regroup from its political turmoil. The positive aspect that Egypt brings to the outsourcing table is good English skills.

Sharp added, “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.” He continued to say that the BPO industry is rapidly growing sector and many people have their hopes for job creation pinned on BPO. Moreover, the BPO industry stands a chance of losing its offshore investment that is currently operating in South Africa, should the new labor laws be passed.

Despite the stiff measures propsosed by the new bill, the BPO sector is still considered a major contributor to job creation in the future of South Africa, reports


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