Rural outsourcing – can it mak

Rural outsourcing – can it make a dent in SA’s unemployment figures? (Part I)

Business process outsourcing has been, for India, a way of leapfrogging the lack of physical infrastructure and spreading wealth wherever talent and language skills cluster. Could this same model work among dispersed rural populations? We explore the implications for rural South Africa in this two-parter.

Rural outsourcing – can it mak

transkei-3 FEATURE

Read part II of our article on the potential of rural business process outsourcing for rural development in South Africa here. 

According to a recent article by Dhanya Ann Thoppil in the Wall Street Journal, a small part of India’s vast business process outsourcing (BPO) industry has begun to expand beyond its bustling coastal cities into the subcontinent’s vast rural areas.

The huge well of untapped human potential in India’s rural areas remains largely untapped due to India’s woeful lack of physical infrastructure: major highways are largely nonexistent, the railway service operates along 1970s lines, and an uninterrupted electricity suppply is far from certain outside larger towns.

That India, which only emerged from the ‘licence Raj’ in the 1990s, would become the world’s undisputed leader in BPO by the late 2000s would have surprised everyone. There had, until recently, been a traditional order to economic development: macro-infrastructure would allow for micro-infrastructure. Securing a steady power and water supply and a reliable system of roads, posts and telecommunications would allow for a more sophisticated service industry to emerge.

India disproved all that. It had an educated, English-speaking workforce numbering in the hundreds of millions but none of the physical infrastructure that would allow this business talent to trade with the outside world on any meaningful scale. Lacking all the basics, it was able to compete only in the details – and, with the advent of the kind of broadband speeds that made modern BPO possible, that is what happened. Indian cities that cannot export manufactured goods now export highly complex financial, customer service and retail solutions to unseen clients.

South Africa’s cities have been quick to capitalise on the same trend, albeit with some years’ delay. They remain hamstrung by relatively higher costs and the declining, yet still exorbitant cost of broadband internet access. What they can offer in spite of this, however, is important: a relatively neutral accent, and a business cultural and general cultural affinity with much of the Western English-speaking world that savvy BPO operators are eager to pay a little extra for.

The key question now is, can BPO, which as an industry has overcome its need for most physical infrastructure, overcome its need for the density of a city altogether? Can rural BPO be made to work?

India’s outsourcing industry generated $69 billion in revenue from exports in the past fiscal year, as well as absorbing millions of rural migrants into the urban economy. However, many bright young Indians are reluctant to forsake close family bonds and move to the cities. Reaching them is therefore the next frontier for the country’s maturing BPO industry.

RuralShores Business Services Pvt. is an exmaple of a firm which provides job opportunities through outsourcing. The name is one of many variations on ‘offshoring’ used by the industry – nearshoring, for example, refers to the practice of moving business processes to a less expensive, third-tier city in the country of origin – in England, this might be cities of the North or Wales. Businesses like Ruralshores, according to its founder Murali Vullaganti, is crucial to spreading the benefits of growths. “The impressive economic progress India is experiencing today is only limited to the urban areas and benefiting the middle class and above,” he said.

The retention of employees is also far better in rural areas. This is important in an industry in which training is so important, and in which the turnover of employees is extremely high. RuralShore’s nearly 1300 employees, however, are spared the challenges of high rent, squalor and overcrowding that beset the working class in many Indian cities. In the communities where they have always lived, life is easier but employers, in contrast, must contend with frequent power and water interruptions. Generators are essential. Nevertheless, Mr Vullaganti is so bullish on his company’s future that he predicts a RuralShores payroll of 100,000 workers by 2020. 

This raises tantalising questions for South Africa’s rural areas, where a lack of land reform, depressed real wages in agriculture and mining, and the ongoing and deepening mechanisation of both those industries has made for a perpetually bleakening economic picture in areas without viable tourism industries.

Read more about outsourcing:

Evaluating Monyetla, the skills programme for the outsourcing sector

As South Africa’s outsourcing star rises, Rand falls — and overseas firms come shopping

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