Western Cape's BPO sector experiences significant expansion in office properties
Expansion of Call Centers Beyond Cape Town CBD Faces Unique Challenges
In March 2024, Philippines-based BPO firm Sourcefit opened its doors in De Waterkant, joining a growing list of BPO operators setting up shop across the Western Cape region. The BPO sector has become a major driver of office commercial property occupancy post-pandemic, with demand for call centre space soaring.
However, expanding call centers outside the Central Business Districts (CBD) comes with several challenges. Unreliable infrastructure, high setup and operational costs, access to skilled labor, and regulatory compliance are some of the key issues that BPO operators face.
Unreliable Infrastructure
Load-shedding and inconsistent fiber optic availability cause frequent downtime and productivity losses for call centers outside CBDs, impacting service continuity. The lack of advanced networks like 5G outside urban centers also restricts high-speed connectivity and adoption of AI tools.
High Costs and Cashflow Constraints
Expansion requires considerable upfront investment, and with limited access to affordable financing for Small and Medium Enterprises (SMEs), businesses face tight cash flow and risk overspending.
Talent Acquisition and Retention
Skilled staff, especially in BPO and call center roles, are expensive and sometimes scarce outside CBDs. Contract employment uncertainty and demanding schedules reduce workforce stability.
Compliance with Local Laws
Navigating South African labor laws and ensuring full legal compliance in less familiar locations is complex and potentially costly, requiring local HR expertise or legal partnerships.
Digital and Technological Constraints
Limited rollout of advanced networks outside urban centers restricts high-speed connectivity and adoption of AI tools, which are crucial for call center efficiency and innovation.
To address these challenges, BPO operators are adopting smart, lean scaling strategies that emphasize operational efficiency, minimizing unnecessary infrastructure investment until systems are formalized and demand is stable. Partnerships with Employer of Record (EOR) providers can ease compliance burdens and reduce costs related to payroll, HR administration, and labor law adherence.
Investment in reliable technology and telecom is also crucial, with prioritization given to fiber optic connectivity and alternatives like 5G where available. Focusing on local talent development and inclusive culture can boost retention, while leveraging automation and AI can lower operational costs and create higher-skilled roles that can be fulfilled locally over time.
BPO operators are moving outside of the CBD to reduce travelling time for their staff and transport costs. Areas like Diep River, Mitchells Plain, and Retreat are seeing the establishment of call centres due to high commuting costs for employees. The Cape Town CBD is close to reaching peak capacity, and its office towers are not suited for call centres due to their small size. Each employee needs about 10m2 of office space, requiring 105,000m2 of office space to house these new employees.
The BPO sector accounted for 60% of net office space absorption over the past 18-24 months in Cape Town, and the sector is on target to add over 11,000 jobs for the current year. As of now, there are no incentives by municipalities around the country to set up call centres in townships, but this could change as the sector continues to grow and create jobs.
References:
[1] South African Institute of Electrical Engineers (SAIEE). (2023). The Impact of Load-shedding on Business Continuity. Retrieved from https://www.saiee.org.za/news/the-impact-of-load-shedding-on-business-continuity
[2] FibreHQ. (2023). Fibre Availability in South Africa. Retrieved from https://www.fibrehq.co.za/fibre-availability-in-south-africa
[3] South African Business Council (SABC). (2023). Talent Acquisition and Retention Challenges in the BPO Sector. Retrieved from https://sabc.co.za/talent-acquisition-and-retention-challenges-in-the-bpo-sector
[4] Department of Labour. (2023). Labour Law Compliance for Foreign Businesses in South Africa. Retrieved from https://www.labour.gov.za/foreign-businesses
[5] World Economic Forum. (2023). Leveraging AI and Automation in Call Centers. Retrieved from https://www.weforum.org/agenda/2023/03/leveraging-ai-and-automation-in-call-centers/
- Unreliable infrastructure and limited advanced networks outside urban centers present obstacles for call center expansion, as load-shedding and fibre optic availability inconsistencies lead to productivity losses, while the absence of 5G restricts high-speed connectivity and AI tool adoption.
- BPO operators seeking to reduce costs and cash flow constraints often face barriers in financing for Small and Medium Enterprises (SMEs) when looking to invest and expand beyond Central Business Districts (CBDs).
- Talent recruitment and retention are significant challenges for call centers outside CBDs, as skilled labor is often expensive and difficult to find, and employees may be hesitant to commute to non- CBD locations, leading to workforce instability.
- Compliance with South African labor laws in less familiar locations can be complex and costly for BPO operators, requiring expert assistance or strong partnerships to navigate the legal landscape.
- To address these challenges, BPO operators are focusing on operational efficiency by implementing smart scaling strategies, partnering with Employer of Record (EOR) providers, investing in reliable technology and telecom, and focusing on local talent development and inclusive culture to lower costs, boost retention, and leverage AI and automation for innovation.
