South Africa's outsourcing industry is set to benefit from increasing competition in telecommunications, with one industry leader predicting the country could soon be among the world's top three.

Last week, Neotel announced it would launch a "point of presence" (network entry point) in Johannesburg that would link with the global network of parent company Tata Communications.

Rajeev Sinha, head of products and services at Neotel, said the point of presence would benefit all companies with multiple offices across the world.

"Instead of linking through London to seek another service provider, a client can now access the country directly via Tata's undersea fibre optic cable network," he said.

The Johannesburg point of presence will connect through Tata's global network to 600 cities and to customers in 200 countries.

Genius Wong, senior vice-president at Tata Communications, said South Africa was quickly becoming a favoured location for business process outsourcing (BPO) and call centres.

"By expanding our connectivity to South Africa, and our investment in the Seacom cable, we're showing our commitment to support our customers as they expand into this burgeoning region."

Wong said South Africa would be the third-largest BPO centre in the world by the end of the year.

Lindsey McDonald, Frost and Sullivan telecoms analyst, said "astronomical" growth was possible for the South African BPO industry.

"That's unless operating conditions become unbearable for companies. However, the industry has grown well despite the high telecommunications cost,"McDonald said.

"We still won't be able to compete with India and China where labour is cheap, but it will open opportunities for countries such as Kenya, where labour costs are low."

Investment in training and the development of call centres has been held back by prices six times those of Ghana.

The South Africa Foundation said South African international leased-line prices are three times as high as the next most expensive country and 31 times more expensive than the cheapest country.

With the implementation of the Seacom undersea fibre-optic network in 2009, South African telecommunications costs are expected to fall by as much as 90 percent. The network will link southern and eastern Africa with India and Europe.

Up to 10000 jobs are expected to be created by the industry within the next five years, though high labour costs could restrict growth, analysts say.