Telkom Fee Cut to boost BPO activities in South Africa

Mergers, Acquisitions and Financial Results

The trade and industry department has delivered on one of the first targets in its industrial policy framework, clinching discounted telecommunications prices from Telkom to lure business services to SA, and in the process securing investments from three foreign companies.

Trade and industry deputy director-general Lionel October said one of the firms would set up a large centre, comprising a few thousand seats, while the other two firms would set up operations for between 500 and 600 seats.

The value of these investments is about R400m and the number of jobs created could be as many as 10000, as a "seat" in the call centre industry provides between one and three jobs, depending on whether a firm operates shifts.

October said the communications department this week finally issued Telkom with an instruction to drop its prices for business process outsourcing (BPO) operations, to bring the cost of telecommunications in line with other BPO destinations. Telkom has declined to release details of the pricing arrangement.

Negotiations between Telkom and the state over cheaper prices have been going on for months and the trade and industry department in its industrial policy set the end of August as the deadline to reach an agreement with Telkom on a development pricing model for the BPO and offshoring sector.

High telecommunications prices are seen as a key constraint to attracting foreign companies to set up call centres in the country and deals with the three foreign companies have been hinging on more competitive telecommunication prices.

A number of local companies have applied for special incentives to set up call centres, but the trade and industry department counts the three applications it received from one U.S. and two European firms to bring call centre operations to SA as a major victory.

The BPO sector is one of the sectors earmarked for intervention by the department in terms of its industrial policy to attract foreign direct investment and create jobs.

The government has set aside R1bn in investment incentives over the next five years to achieve this. The incentives are on a par with a global benchmark to provide grants equal to half of the salary of each job created and a skill-training grant.

"These companies will now get the incentives from government plus the special telecommunication prices," October said. SA has had some success with call centres, with the subsector growing 8% a year over the past four years and now employing 54,000 call centre agents.

Business Day