Looming threat for major South African employer

Businesses that offer outsourcing services, such as call centres, face the looming threat of ambitious growth targets being hindered by South Africa’s tensions with the United States, the Sunday Times reports.

This is according to Reshni Singh, the CEO of Business Process Enabling South Africa (BPESA), which promotes the country as an offshoring destination.

She said that the business process outsourcing sector has grown significantly in recent years, with the U.S. comprising 1% of all business conducted by the sector in 2019 to 33% today.

This helped the number of jobs in the sector to grow from 65,000 in 2019 to 150,000 in 2024, and market revenue increased from R18.9 billion to R53 billion over the same period.

Singh said the sector hopes to increase servicing of the U.S. market by 38% by the end of the year and attract additional foreign direct investment to boost jobs to 500,000 by 2030.

However, to achieve this goal, she believes the industry will need the support and collaboration of government officials, politicians, and the sector’s partners.

“We will need senior government officials and politicians to be able to be part of that deal team, to be able to negotiate and to be able to get us to that level of 500,000. I think it’s highly possible,” Singh told the Times.

Competition within the market is also growing, according to the BFESA CEO, with 13 new major entrants in the BPO sector providing services to the banking, financial services, health care, and telecommunications industries.

She said South Africa is particularly suited to servicing U.S. companies because had good English and high levels of empathy. Still, the country faces increased competition from countries such as India and the Philippines.

Tensions between South Africa and the U.S.

President Cyril Ramaphosa recently told Parliament that South Africa sees the U.S. as a strategic trading partner and aims to show the global hegemon that it is a good trading partner, referring to the African Growth and Opportunity Act (Agoa).

Agoa, enacted by the U.S. in 2000, aims to provide select sub-Saharan countries with duty-free access to the U.S. market, greatly benefitting South Africa’s ability to compete in the overseas market.

However, South Africa’s international relations, such as the amicable ties with China and Iran and a more hostile relationship with Israel, have resulted in U.S. members of congress wanting South Africa kicked out of the trade deal.

South Africa being kicked from Agoa would also devastate South Africa’s motor industry and result in the closure of hundreds of suppliers.

Because South Africa exports two vehicles for every three produced, Billy Tom, president of the National Association of Automobile Manufacturers of South Africa, said that without international trade, the country does not have a viable automotive industry.

He added that losing the country’s third-largest market would considerably decrease the industry’s viability.

The U.S. is South Africa’s third-largest export destination, according to Tom, bringing in R24.1 billion in 2023.

He says that Agoa significantly strengthened exports from the industry, having grown by 498% from Agoa’s inception in 2001 to 2023, says Tom.

Being removed from Agoa would also significantly impact suppliers, with Agoa having created 85,000 direct and 426,000 indirect jobs, said Tom, who is also the CEO of Isuzu Motors South Africa.

Two of the local industry’s most prominent players, BMW and Mercedes Benz, may reconsider production in South Africa, said Tom, which would further impact the sector.

China’s production of electric vehicles has also hurt South Africa’s exports of internal combustion engine vehicles.

Data from the Naamsa showed that carmakers in the country exported 23% fewer vehicles in 2024 than in the year before.

Passenger vehicle exports fell by 25% year-on-year, light commercial vehicle exports by 18%, and truck and bus exports by 19%.