Although he started his career in London in investment banking, CallingtheCape executive director Luke Mills seems to be custom-made for the call-centre industry, rather than a pinstripe suit.

Mills doesn't miss a beat when talking about the call-centre industry and explains that he is so passionate because it has many positive spinoffs for the country.

It not only provides employment for people from previously-disadvantaged backgrounds, but also incredible amounts of upskilling that are bringing South African companies and employees in line with international standards.

It empowers women, as most of the people who work in call centres are women, and it empowers the young; the average age of a contact-centre agent is about 25 years.

"It is a very meritocratic industry and people who enter on the bottom level and excel as agents become team leaders, then supervisors, then contact-centre managers, so there are wonderful opportunities to develop leadership for people who have not had many advantages in life," says Mills.

"Once they have developed those leadership skills, the world is their oyster - they can stay in a management role, they can move into the human resources or information technology department or they can set up their own businesses," he says.

CallingtheCape, a government-backed specialist development agency that promotes the Western Cape as a destination for national and international investors, sees the contact-centre industry as being a crucial bridge between the first and second economies that President Thabo Mbeki refers to and, at the same time, an industry in which South Africa can compete with the best companies on the global stage.

"We need more of these kinds of industries and we need more financial and political support at the highest levels," says Mills.

Political support has been forthcoming for the call-centre industry, with the liberalisation of the telecommunications industry last month.

"I think deregulation is a strong sign from government that it is serious about this industry; it is crucial to this industry, we lobbied for it and we are delighted," says Mills.

"It gives us another big push in the right direction.

"We are now in a position where we can compete on service, on the type of products that are on offer and more or less on price with any other offshore destination," he says.

Mills believes that Telkom deserves credit for the effort that it made to get the call-centre industry more competitive by introducing a solution a couple of years ago which, although it wasn't an end-to-end Voice over IP (VoIP) solution, involved some elements of VoIP, enabling rates for contact centres to fall to about 30 c to 45 c a minute for international calls, depending on volume.

He points out that, even though that is much lower than the retail price that South Africans pay for making an international call, it is still seven times higher than companies are paying in other offshore destinations.

Mills explains that in India, the Phillipines and Malaysia, for example, companies are not paying for calls on a per-minute basis, but are buying lease-line capacity from telecommunication companies, managing their own networks and deploying VoIP technologies.

Information and communication-technology company Storm says that, at its simplest, VoIP technology converts voice to data and transmits it via a digital network.

This means that a company can make international, cellular and national telephone calls at reduced rates, cutting its phone bill dramatically.

VoIP is standard technology in most developed countries and is used commonly by large companies between their offices to reduce telephone costs and to allow call centres to be centralised but, where customers still call a local number - you call the call centre number in your local town - the call is then routed over a VoIP network to a contact centre that may even be in another country.

Since the opening up of the telecommunications market in South Africa, all of the value-added network service providers (VANS) have been able to offer VoIP technologies and, as a result, prices for connectivity have come tumbling down.

"The price of a 2 MBS lease line using multiple-packet labelling system (MPLS) technology from South Africa to the UK or to the US is now below $200 000 a year," says Mills.

"It is difficult to compare 2 MBS lines with per-minute charges, but our calculations suggest that the price of $200 000 is probably half of what the cost would have been on the old Telkom regime," says Mills.

"The equivalent price in India is probably about $150 000; so we are still a bit more expensive but in the same ballpark," he says.

The number of customer interactions globally, particularly in the de-veloped world, is continuing to increase, which is putting massive demand on call centres in countries like the UK, the US, the Netherlands and Germany.

"Not only are these call centres getting very expensive to run, but they have also got high attrition and it is difficult to recruit new staff," says Mills.

Offshore is a business imperative if international companies are going to continue to provide increasingly demanding customers with the services that they require, and countries including India, China and South Africa have the opportunity to grow their offshore business.

Mills thinks that India is going to remain the premier destination and is probably always going to account for 40% to 50% of all offshore contact-centre work but, for reasons of risk concentration, operational reasons and also because companies realise that there are some things India can do well and some things not so well, there are other destinations which are going to be in the second tier.

South Africa, along with the Philippines, China, Malaysia, Canada, Israel and Ireland, is in the second tier, but the question is - is South Africa going to be right at the top of the second tier or is it going to bubble along and be in the middle or at the bottom of the second tier?

Mills believes that South Africa has several advantages that could place it towards the top of the second tier.

"The order in which companies put business streams offshore is determined by the risk and the capex of putting them offshore, so the transactions that go offshore first are those that are relatively low-risk and do not require a lot of investment," he says.

Back-office processing is one example, and that work went to India first.

"In South Africa, we have not seen a great deal of back-office processing, but we have seen a lot of customer-contact work, starting with relatively simple transactions, such as outbound sales, which is tightly scripted and a relatively straightforward customer service," says Mills.

But, as companies in the US and the UK, in particular, have outsourced a lot of their low-risk, low-investment items, they are left with unscripted, complex voice interactions with customers.

An example is when a customer calls into a contact centre for any one of 15 or 60 different reasons, as happens in financial services or travel, for example.

In these transactions, the agent does not know what to expect and that re-quires a much more skilled, not necessarily better-educated, agent and an agent who speaks English to a customer whose first language is English to ensure that the communication between the agent and the customer is 100%.

That agent will probably require three or four months of training, and that means that the capital costs are going to increase.

"A good portion of this complex work is going to go offshore and that is starting to happen now," says Mills.

Companies have put that kind of work in India and in some areas it is working successfully, but in other areas not, and a number of blue chip com-panies that have put that voice work in India have pulled it out and are looking for somewhere else to go.

"South Africa has a massive advantage over India in this respect because the agents in South Africa who are doing international voice work, by and large, have English as a first language or are completely bilingual," says Mills.

"While the agents in India might be graduates and very smart people, English is their second language and they are struggling with this kind of work, as they are not picking up the nuances or the slang and are not responding in the right emotional way to what is being said," he says.

If you look around the world for low-cost competitive labour destinations, which have large concentrations of English first-language speakers, there aren't that many.

Canada and Australia are already relatively high-cost destinations, Eastern Europe's first language is not English, nor is the Philippines, and they are going to have the same problem that India has.

South Africa, therefore, has a huge opportunity to be a niche player focusing on high-value complex voice customer interactions.

"That has been our sales pitch from day one," says Mills, "and the evidence thus far from companies that have moved to South Africa has been extremely positive."

Companies like Budget Insurance are reporting that their call centres in South Africa, which are handling relatively complex customer service and sales, are performing as well as their call centres in their home markets and are among the best-performing call centres in all their offshore destinations.

CallingtheCape thinks it is now in a position where it can go out and compete for larger-scale business and hopes to secure a commitment from at least one global multinational outsourcer to develop operations in Cape Town this year.

"If a major global outsourcer invests in the Cape it will probably grow to 3 000 to 4 000 seats, and that will take us into a whole new ball game," says Mills.

"If it doesn't happen, we will still have a growing offshore industry," he says.

New investment commitments of R380-million were made in the Western Cape call-centre industry last year, resulting in growth of 25% and over 2 000 new jobs.

"Based on what we have in the pipeline and in expansions, that is expected to be matched this year," says Mills.

He adds that last year was a year in which the talk and promise of growth in the contact-centre and business-pro-cess outsourcing (BPO) sector became a reality.

High-profile international companies like Ambition 24 Hours Group, Budget Insurance, STA Travel/Lufthansa Process Management and Sales Engine invested in call centres and BPO units in Cape Town during 2004.

Other international companies - Pixel Faerie, State Street, Grove Group and Intelligent Business Solutions - also invested last year, joining already-established companies, such as Dialogue, Northern Communications and Aerocorp.

Mills says that, apart from the new investments, 14 of the existing operations expanded during 2004, adding almost R44-million to investments.

There are now 110 operations in the Western Cape and, at last estimate, over 13 000 people were working in the industry.

Further significant investment has been clinched for 2005 and, in the first three months of this year, a few new local outsourcers and one new German-owned outsourcer have set up in Cape Town.

Data Monitor reports that there are 494 call centres in South Africa and predicts that there will be 939 by 2008.

The company says that the number of offshore agents in South Africa in 2003 was 1 400 and that this figure will reach about 6 000 in 2008, which would put South Africa in the middle of the second tier.

Mills believes that this is quite a conservative forecast.

"I think that we should be able to do a lot better than that; one major investment from a global outsourcer, and that target will be burst wide open," he says.

In terms of the split of call centres in South Africa, Data Monitor says that the Western Cape's 32% of the total in 2003 is going to increase to 37% by 2008, whereas it sees the share of Gauteng reducing from 61% to 50%.

Last year, funding for Callingthe-Cape from the city and the provincial government increased by 600% on 2003.

Although it is not expected to grow by that margin this year, Mills hopes that funding will increase by 30% to 50% this year.

The money is used for marketing, operational expenses and research.

"Our primary role is to see that the industry grows and that job opportunities are created, but we also want to see that new companies are developing and black entrepreneurs are given a chance to succeed," says Mills.

This year, the company is doing a big research project to determine what persuades companies to outsource and, in particular, profile the types of com-panies that are likely to outsource to black suppliers and do preliminary research and marketing into those companies.

"We will then be able to give that research to our black economic-em-powerment companies," says Mills.

Of the 32 local outsourcing com-panies in the Western Cape, eight are black-owned and 50% have some measure of black shareholding.

Mills points out that financial services and other companies that have gone through the ICT charter process and now have procurement targets that they need to hit for their scorecard can outsource part of their telemarketing or customer services to a black call centre.

"I don't think companies are aware that they can source from black suppliers in this industry, and we would certainly suggest that any companies that are interested in that get in touch with us so that we can point them in the right direction," he says.

There are still some significant obstacles to the formation of new black-owned companies in the sector, the main one being access to finance.

"The early-stage companies battle to raise money, even though they are competing head-on with competitive international markets and they are winning business," says Mills.

"It is a shame that the local financial community has not spotted the opportunity because they could make a lot of money in this industry."

CallingtheCape is in the process of appointing consultants to assist with business development and raising finance for young companies.

During 2004, CallingtheCape implemented a number of pilot training programmes.

This included assisting 60 learners into the commercial workplace through its cadet programme, supporting a programme through which 65 Afrikaans-speaking black students learned Dutch and reaching 10 000 young learners through a schools outreach programme.

Through this, the company gained an understanding of what the challenges are in training people who are not likely to get jobs on their own and released a draft strategy for a new skills-training initiative, which will see it working in partnership with the provincial government, the Smart City programme, further education and training institutions and the private sector.

The core curriculum is based on the National Qualifications Framework level 2 that the Services Sector Education and Training Authority (Seta) administers, but also included are a number of other elements, such as life-skills training, foundational training, information technology skills, call-centre simulation products, accent training and practical experience in call centres.

"At the moment, we are working out how to manage the programme and also how to fund it, and are looking for private- and public-sector contri-butions for training," says Mills.

"One of the issues we have in the industry is that the services Seta, under which the call-centre industry falls, has reached its target in terms of learnerships and there isn't any more money available for call-centre learnerships."