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South Africa Information Technology Report Q1 2012
Business Monitor International, January 2012, Pages: 60
South Africa Information Technology Report provides industry professionals and strategists, corporate analysts, information technology associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on South Africa's information technology industry.
Market Overview BMI expects South African IT spending to increase from US$11.9bn in 2012 to about US$20.0bn in 2016, faster than real GDP growth. Major infrastructure and transport projects will provide encouragement for growth during BMI's five-year forecast period. However, South African businesses are expected to maintain a cautious attitude to IT investments, due to continued global economic uncertainty.
The 2012-2016 South Africa IT market compound annual growth rate (CAGR) is projected to be in the region of 13%, as a number of major IT infrastructure projects generate spending at provincial levels. A projected improvement in South Africa's broadband infrastructure and international bandwidth will also be an important market growth driver and will help drive demand for cloud computing solutions.
The South African Department of Education has announced a target of rolling out laptops to all school children in the country by 2014. The government is looking at various ways to achieve this, including the use of portable mobile computer labs for schools where there is no infrastructure. This followed the launch, also in 2010, of the Teacher Laptop Initiative, which should encourage PC procurements by schools across the country.
Meanwhile, the IFMS (Integrated Financial Management Systems) project manages the evolution of government IT systems to support interoperability and e-government service development. The project, supervised by the State Information Technology Agency (SITA), involves the integration and migration of government finance, HR, asset management, logistics and other business solutions into a single distributed system.
Competitive Landscape In 2011, IT services firms will target the emerging cloud computing opportunity, which has attracted a number of players into the market. In 2011, IBM said that South Africa would become only the fourth country in the world to host both an IBM datacentre and a cloud laboratory. Meanwhile, new telecoms service provider ARC Telecoms has signed cloud services delivery agreements with telecoms carriers such as Telkom and Vodacom.
Indian IT vendor Wipro said in November 2011 that it is setting up a 1,000 seat delivery centre in South Africa. The company already has an office in Johannesburg with more than 500 people onsite and offsite servicing its clients there and the new centre is expected to create jobs for an additional 1,000 people. In its fiscal year ending June 2011, South African IT giant Gijima reported earnings of ZAR2,566mn, down 12.8% from ZAR2,943mn in its previous fiscal year. The company's performance was impaired by a settlement with the Department of Home Affairs. However, Gijima's Managed Services division achieved 8% growth in revenues.
Computer Sales South Africa's computer hardware market is forecast to grow at a CAGR of 8.3% over BMI's five-year forecast period from an estimated US$5.2bn in 2012 to US$8.3bn in 2016. Following a strong recovery in PC shipments in 2011, growth is expected to slow in 2012, as consumer confidence is affected by concerns about the economic recovery.
The main growth drivers during BMI's five-year forecast period include rising computer penetration, falling prices and vendor and retailer promotions, as well as the popularity of notebook computers and ultra-light products. In the past few years, falling prices have boosted PC unit shipments, along with aggressive retail promotions.
Software The software market is forecast at around US$2.3mn in 2012 and, despite current economic headwinds, is projected to have a CAGR of around 15% over the 2012-2016 period. South Africa's software market is developing, despite the problem of software piracy, which still accounts for about 35% of software. The growing regional ambitions of South African companies will be a factor driving corporate spending on software, but vendors will have to meet increasing demand for vertical-specific applications. Enterprise resource planning remains the most popular enterprise software application with South African businesses, with a growing number of them now using this tool. Despite their difficulties accessing credit, South African small and medium-sized enterprises (SMEs), facing change and seeking efficiencies, are likely to represent an opportunity.
IT Services The South African IT services market is projected at around US$4.4bn in 2012 and is expected to grow to around US$7.6bn in 2016. Major infrastructure and transport projects should provide a framework for faster spending growth during the forecast period.
Spending on IT services still depends heavily on government programmes and the government will remain the largest spending IT services vertical, followed by financial services and telecoms. Cloud computing is becoming viable in South Africa due to improved and lower-cost bandwidth availability.
E-Readiness Internet penetration in South Africa is by far the highest on the continent, although broadband penetration remains low. In the small business sector, some progress is being made. According to a 2008 survey, 63% of smaller companies using computers to connect to the internet now have a DSL internet connection, exactly the proportion using dial-up five years ago.
Despite the opportunities, prospects for the IT market remain constrained by high communication costs and uneven infrastructure development. The government launched a series of initiatives to tackle this issue, but there are doubts about whether the government has the will to tackle the key question of termination rates and pricing implications.
The South African broadband market will become increasingly dynamic over the next five years. One development that is expected to shake up the market is the inauguration of various undersea cables, which will reduce the cost of bandwidth. Other developments expected to provide the broadband market with a major stimulus include local loop unbundling – to be introduced in phases over several years – and the deployment of new network infrastructures to rival Telkom's national network.
South Africa IT Sector SWOT
South Africa Telecommunications Sector SWOT
South Africa Political SWOT
South Africa Economic SWOT
South Africa Business Environment SWOT
IT Business Environment Ratings
Table: Regional IT Business Environment Ratings
Middle East & Africa
History And Market Structure
Industry Forecast Scenario
Telecoms Sector – Internet – Historical Data & Forecasts ,2009-2016
Table: South Africa – Economic Activity, 2011-2016
Country Snapshot: South Africa Demographic Data
Section 1: Population
Table: Demographic Indicators, 2005-2030
Table: Rural/Urban Breakdown, 2005-2030
Section 2: Education And Healthcare
Table: Education, 2002-2005
Table: Vital Statistics, 2005-2030
Section 3: Labour Market And Spending Power
Table: Employment Indicators, 2001-2006
Table: Consumer Expenditure, 2000-2012 (US$)
Table: Average Annual Wages, 2000-2012
How We Generate Our Industry Forecasts
- IBM SA
- Sahara Computers
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