Western Cape BPO sector experiences significant growth in office properties
Expansion of Call Centres Beyond Central Business Districts in South Africa
The growth of call centres in South Africa, particularly in the Western Cape, is having a significant impact on office commercial property, according to recent reports from Catalyst Fund Managers and Rode. However, expanding call centres outside of Central Business Districts (CBDs) comes with its own set of challenges.
One of the key challenges is navigating the complex legal and regulatory landscape. South Africa's labor laws are strict, with strong unions and worker protections, especially outside CBDs where local regulations may vary, creating compliance risks for new call centres.
Another challenge is the high setup costs and infrastructure demands. Establishing legal entities and subsidiaries outside CBDs requires significant upfront investment in HR, administration, and facilities before revenue realization, which can be prohibitive for smaller firms.
Attracting and retaining skilled employees in peripheral areas can also be difficult. The younger generation, a key workforce demographic, demands flexibility, digital tools, and inclusive leadership styles. Adapting to these preferences can improve employee engagement and performance.
Operational challenges and the impact of technology also present challenges. Call centres require 24/7 customer support aligned with various time zones, imposing demanding schedules. The rise of AI automation is reducing routine jobs but increasing demand for higher-skilled roles, meaning workforce planning must balance human and AI agents efficiently.
Despite these challenges, there are solutions. Engaging Employer of Record (EOR) services can simplify compliance, payroll, and benefits management, mitigating regulatory risks and lowering entry barriers in non-CBD areas. Leveraging AI and digital transformation can automate routine tasks, reducing labor costs and operational complexities, while also allowing for strategic human resource deployment toward higher-value roles.
Flexible leadership and work models can attract and retain talent outside traditional CBD hubs. Embracing Gen Z's digital fluency and preference for flexible work schedules, remote work options, and coaching-style leadership can improve employee engagement and performance.
Infrastructure and planning partnerships can support reliable service delivery. Collaborating with data center providers equipped to handle high-density, energy-efficient operations outside CBDs can ensure reliable service delivery. Thorough operational and regulatory planning is essential to avoid costly mid-expansion disruptions.
Some companies have already successfully navigated these challenges. For instance, Philippines-headquartered BPO firm, Sourcefit, and India's Wipro have set up operations in De Waterkant and Century City, respectively. The lack of convenient facilities in industrial areas can hinder the success of call centre setups, but demand for call centre space has led to the emergence of BPO nodes in Century City, Salt River, Wynberg/Claremont, and the Cape Town CBD.
UK operator Sigma Connected set up a call centre in Paarl in January, citing the location's proximity to employees as a key factor. The Rode report notes that call centres are being set up in Diep River, Mitchells Plain, and Retreat due to high commuting costs for employees. The BPO sector accounted for 60% of net office space absorption over the past 18-24 months in Cape Town, meaning the sector needed to find over 100,000m2 of office space every year since the end of the pandemic.
The BPO sector in Cape Town is on target to add over 11,000 jobs this year, making it a major driver in office commercial property occupancy post-pandemic. The sector has grown by about 10,000 seats a year since the end of the pandemic, employing at least 90,000 people in the Mother City. However, there are currently no incentives by municipalities around the country to set up call centres in townships. The Cape Town CBD is approaching peak capacity and its office towers are not suitable for call centres due to their small size.
The Paarl call centre created 250 jobs in the first phase and is expected to grow to around 1,000 roles in the coming years. The success of these call centres outside CBDs demonstrates that with the right strategies, the challenges can be overcome, and the benefits of call centre expansion can be reaped.
- Infrastructure partnerships can help in ensuring reliable service delivery by collaborating with data center providers that can handle high-density, energy-efficient operations outside Central Business Districts (CBDs).
- The BPO sector has seen significant expansion in South Africa, particularly in the Western Cape, which is impacting the office commercial property market and driving demand for over 100,000m2 of office space each year.
- Engaging Employer of Record (EOR) services can simplify compliance, payroll, and benefits management, lowering entry barriers for new call centres in non- CBD areas.
- Leveraging technology, such as AI and digital transformation, can automate routine tasks and reduce labor costs, while also allowing for strategic human resource deployment toward higher-value roles in the BPO and call centre industry.
