You might think we are hurtling down the road into the silly season but, in fact, now is the time to get serious about talking jobs for next year and decades to come, says Andy Searle, CEO of BPESA, the industry body for the Global Business Services (GBS) sector in South Africa. BPESA is organising the GBS Investor Conference & Awards in Durban from 19 to 21 November.
The conference’s central theme is Re-Imagining 2030. It challenges participants to look creatively at the gaps in our economy where there is comfortable room for investment projects and for corporates and markets to grow.
South Africa is already one of the hottest beneficiaries of foreign direct investment (FDI) in Global Business Services (GBS). GBS facilitates international outsourcing, allowing companies to take their service departments offshore. They can, for example, retain their base on the other side of the world but still offer a local service to clients in countries such as South Africa.
“New thinking like this is what keeps us competitive,” says Searle. “It applies as much to our economy and its products as it does to our world-beating Springbok team.
“I have long been fascinated by how sport is a living, breathing example of the values of fast thinking and slow planning, disciplined training and the need to surprise the opposition,” he adds. “When you think about the strategic thinking and deep commitment to training and preparation that is required, you realise that sport is like a template that we can reapply in our business lives to guide our strategies creatively.”
That bold approach is what has made President Ramaphosa’s South Africa Investment Conferences so successful. There were those who said his SONA 2018 announcement of a target of R1.2 trillion in investment over five years was breathtakingly audacious.
But in October 2018, the first South Africa Investment Conference scooped pledges of R300 billion, helping FDI in South Africa to a five-year high that year. A United Nations Conference on Trade & Development (UNCTAD) report calculated that this was a massive 446 percent leap in FDI compared to 2017.
In its Realising The Vision report, PwC estimated that this would add R338 billion to South Africa’s GDP over the five years from 2019 to 2024. In the process, says PwC, this should create 165 000 direct and indirect jobs on average per year and a further R59 billion in revenue for the government.
Looking further ahead, to the 10 years from 2025 to 2035, this initial investment tranche would enable potential production worth about R468.8 billion, says PwC. This in turn would add about R505 billion to South Africa’s GDP, plus creating or sustaining about 116 000 direct and indirect jobs on average per year. Revenue of about R133 billion would accrue to government.
Now the second South Africa Investment Conference in November 2019 has topped the 2018 outcome with R363 billion in investment pledges, building on the successes of 2018.
Investment is vital to break the logjam of South Africa’s slow-growing economy and high unemployment, which hit 29 percent in the third quarter of this year. Of the 38.4 million people of working age in South Africa, Stats SA says that 6.7 million are jobless.
But there are positive indicators. We have already seen the GBS sector put on a further 53 000 jobs. This sector had the highest increase in employment numbers across the South African economy, according to Stats SA in June 2019. BPESA forecasts that South Africa has huge potential for GBS growth and could add 50 000 direct jobs over the next five years, plus another 150 000 indirect jobs. Of the above , 85 % of that were jobs for our youth ( 18 to 35 years)
GBS jobs are already being created in the Western Cape as well as KwaZulu-Natal, with Gauteng now following suit. These jobs are mostly in telecommunications, education, retail and insurance. Other business services that can be outsourced remotely include finance and accounting, legal services, HR services and knowledge services. This is particularly relevant to South Africans who are seeing job losses in finance and legacy corporates such as mining companies restrict their more traditional career options.
GBS businesses are relatively straightforward and cost effective to set up, rather than requiring factory production lines or the infrastructure to access delivery routes. As the majority of this work – 87 percent – is voice-based this makes GBS an excellent fit for South Africa, which has so many reasonably well qualified but jobless work-seekers.
The jobs do not usually require tertiary qualifications but can offer young employees a set of transferable skills that can help them build a career. This makes the GBS sector a win-win for the international investor, local economies and young people seeking work, especially in a vibrant, new sector.
The GBS sector is particularly well suited to being rolled out to newer industrial hubs beyond the main metros, says Neville Matjie, CEO of Trade & Investment KZN.
“Towns such as Richards Bay, Newcastle, Ladysmith and Port Shepstone offer a pool of talented workers who could adapt to GBS with relevant training and upskilling,” he says. “We have already spoken with FET colleges and they are willing to provide relevant skilling programmes.”
This geographical spread would have the advantage of carrying the economic value of the growth in GBS to the hinterland and more rural areas. Known as impact sourcing, this can help grow employment in more marginalised communities.
In just the second quarter of 2019, for example, a total of 5 391 GBS jobs were created. Using a household multiplier of seven, this means that more than 37 700 household members benefited from those jobs. In fact, given that the target was 2 810 GBS jobs for that quarter, which would have benefited 19 600 household members, that means in those three months alone the sector outstripped its own targets by helping nearly twice as many household members as planned.
President Ramaphosa has highlighted the urgency of developing and implementing “a stimulus package to ignite growth that will lead to the creation of jobs, especially for young people and women.” About four out of five of these new GBS jobs went to youth workers – the under-35s, who bear by far the brunt of joblessness in South Africa. The GBS sector also addresses other issues of transforming economic participation as 97 percent of jobs are for people of colour and 66 percent for women.
ICT has for some time been recognised as a primary pillar to ensure radical economic transformation in Durban, points out Russell Curtis, CEO of Invest Durban, whose primary goal is to facilitate sustainable investment into the city. ICT has become one of the top five sectors for FDI in South Africa, according to UNCTAD.
“Durban won the IBM Smart City Challenge in African in 2014,” says Curtis. “We are attempting to put innovation and technology at the core of everything we do, while expanding our world-class ICT infrastructure. We have launched Innovate Durban, for example, which encourages the youth and SMMEs to use technology to address business challenges.”
So far the United Kingdom has been the largest GBS investor in South Africa, with the United States, China and Australia also making significant contributions. Such investors have responded to the dti’s revised, three-tier GBS incentive programme that became effective from January 2019 and which is seen as offering significant and competitive value.
“FDI is an important enabler of economic growth,” says PwC. “For emerging market economies, foreign investment inflows are crucial for transferring money and expertise from multinational companies to local enterprises. Emerging markets also need FDI to help them finance infrastructure deficits.”
Investors should take a longer-term, strategic view, advises Curtis. He believes this will provide a good return on investment and also allow economic development to grow sustainably, riding through any challenging seasons.
Among the thought-provoking sessions planned for the GBS Investment Conference will be a focus on employment equity and growth in GBS, especially in terms of youth employment. The conference will also highlight South Africa’s value proposition – good-quality, English-speaking talent, significant cost savings, a strong foundation in contact-centre and niche services, evolving capabilities for next-gen services for digital contact centres and world-class infrastructure.
One of the most important roles that such globally traded services can play is to strengthen economic and social fundamentals, from funding needed to maintain infrastructure to social cohesion. As the conference tagline puts it, “Make an impact . . . Change a country . . . Leave a legacy.”
From insights through case studies on youth jobs to a closing gala banquet, Searle and his BPESA conferenced team aim to show all participants why, as the final evening’s theme says, “Nothing’s impossible”. And to prove it, South Africa’s latest global superstars, America’s Got Talent finalists the Ndlovu Youth Choir, will have guests on their feet with their heartwarming vocals and strong presence.
To participate in this reality-changing conference, register at: https://www.gbsevent.co.za/register-to-attend.html. For more information, contact [email protected]
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