Hoping to cash in on business process outsourcing (BPO), South Africa is increasingly courting U.S. and European multinational businesses. Analysts on the continent say that while the African BPO market is still in its infancy, it is poised to take off, especially in South Africa.

“I don’t believe that the industry has gotten off first base. Lots of talk: However, I do believe that 2007 will see South Africa firmly established,” says Albert Rossouw, who runs the BPO consultancy Strategy Threesixty in Cape Town.

Positive signs, says Rossouw, include establishment of government grants and telephony deregulation. Other factors include South Africa’s accredited training efforts, large unemployed talent pool and time zone position. This makes it a near-shore destination for the United Kingdom and other European countries—since business hours overlap—and an overnight services provider for the United States.

“Lufthansa services all of its U.S. clients from Cape Town,” says Luke Mills, executive director of CallingtheCape, a regional trade association.

BPO is usually call-center and data-processing work, but South Africans expand the definition to IT services like programming.

South Africa’s BPO industry employs 80,000 people, the vast majority in “captive” centers for national businesses. Probably fewer than 5,000 serve foreign businesses, says Craig Reines, a general manager with TeleTech Holdings, a U.S. outsourcing services provider that is setting up facilities in South Africa.

Until now, most outsourcing work has been done by local firms, Rossouw says, but look for more examples like TeleTech and U.S.-based Sykes Enterprises, with a 250- to 300-seat call center in Johannesburg that services U.K. and German clients.

Among the hurdles the country faces are high (though decreasing) telecom rates, government red tape for investors, and a lack of office parks and business continuity facilities, Rossouw says.