Gauteng carves out a niche in outsourcing industry with unique incentives (Part II)

The Gauteng Growth and Development Agency (GGDA, www.ggda.co.za) has a competitive business process services incentive of its own, that is designed to differentiate the province from the Western Cape – its chief rival for incoming BPO custom. Although the government of Gauteng Province has no BPO-specific tax incentives of its own, there are a number of national tax incentives specific to Gauteng, as well as several important geographic features that combine to create a niche business outsourcing environment on the Rand.

Keryn House, CEO of Contact in Gauteng, an industry group that had input into the first incentive schemes, said “The call centre industry in Gauteng is the largest in the country, but is very fragmented, which weakens us. We are now trying to mobilise the industry in the province through Contact in Gauteng.”

 In 2012 the London School of Economics (LSE) Outsourcing Unit found that the Western Cape BPO industry still dwarfs that of Gauteng (with 3,900 FTEs, versus KwaZulu-Natal’s 3,300 and 6,800 for the Western Cape). However, despite this disparity, Gauteng may well hold the greater long-term prospects for growth due to the concentration and density of its inner city. As the contact centre industry matures, and as more sophistication and skill is expected from contact centre workers, Gauteng-area employees may present a brighter prospect to overseas employers.

Gauteng hosts a greater cluster of centres of higher learning and higher technology than those in Cape Town and Durban. The cluster of Wits University, the University of Johannesburg and most of South Africa’s private-sector hi-tech research capacity may combine with the physical density of Johannesburg’s urban core to create a true ‘hub’ effect, in which the great proximity of workers, talent and infrastructure enables nimbler change and innovation. Next to such prospects, Cape Town’s offerings – which have for some time rested on its lifestyle product, and the availability of European language speakers that that lifestyle creates – are rendered in a new light.

As for Johannesburg’s city centre, years of concerted public and private investment are starting to pay off. Current and forthcoming city initiatives should see a sustained shift in Gauteng call centres’ concentration from the northern suburbs to central Johannesburg. Apart form the City of Johannesburg’s longstanding efforts to lure business process outsourcing players back into downtown Johannesburg, the national government is also playing its part through the Urban Development Zone tax incentive. After a wrenching flight from central Johannesburg in the early 1990s, the city offers high volumes of vacant prime office space in peri-urban areas and the CBD, and Johannesburg’s Urban Development Zone (UDZ) has been earmarked for the development of ICT firms (including call centres) and offers rentals, utilities and services at subsidised costs. The Nasrec Smart City complex, a 2010 Soccer World Cup legacy project, has secured a call-centre investor. Pretoria is expected to be the next big growth area. It would seem, then, that the provinces’ race for BPO spoils is only beginning.

See Part I to read about the the over-arching national BPO&O incentives that Gauteng Province’s value proposition is design to complement.

See how Gauteng stacks up against South Africa’s other BPO magnet, the Western Cape:

BPO in the Western Cape: how has Government come to the party?

Cape Town CBD exerts global pull on BPO clients

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