For decades, business process outsourcing (BPO) has in large part defined the development of many industries and host countries. Having doubled in value globally to $104bn in the 15 years to 2014, BPO is one of the main drivers of FDI and can also serve as an indicator for the attractiveness of host countries to the global FDI community.
In this highly competitive environment, the countries of the Middle East and Africa (MEA) are constantly losing ground to Asian, eastern European and even South American destinations. The Maghreb countries and Ghana and Kenya are still considered as attractive BPO destinations in the regional contest. However, only South Africa is outperforming in the region and boosted its BPO sector from 10,000 companies in 2010 to 25,000 in 2015.
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One might blame the weak performance of other MEA countries on political instability. However, a much more interesting – and for the MEA countries, more worrying – reason is the BPO industry’s trend towards robotic process automation. Technological advances in automation and communication technology will enhance overall computational power and lead to the replacement of offshore employees by machines. This leads to enormous savings potential for companies through geographic independence and higher productivity. However, they will face a bottleneck concerning access to and availability of a suitable and qualified talent pool. A young and highly educated population and a good education system are crucial attributes, which South Africa has in common with other successful BPO players such as India, the Philippines and Vietnam.
These countries understand best that the future of BPO is about making savings through knowledge and skills rather than through cheap labour and tax incentives. If the MEA countries do not react to these needs, they risk losing one of the best sources of FDI in their social and economic development.
Mazdak Rafaty is managing partner of Ludwar International Consultancy and SME advisor to the joint Emirati-German Chamber of Commerce. Email: m.rafaty@lic-consulting.com