South Africa - Information Technology South Africa - Information Technology
Overview
| 2017 | 2018 (Estimated) | 2019 (Projected) | |
| Total Market Size | 6.61 | 7.12 | 6.56 |
| Hardware sales | 2.21 | 2.29 | 2.04 |
| Software sales | 1.66 | 1.84 | 1.72 |
| Services sales | 2.74 | 2.99 | 2.80 |
| Exchange rate USD $1 |
*BMI Industry Report 2018 Q2 Sales
Data Sources: Above figures are unofficial estimates obtained from industry sources.
South Africa has one of the largest information and communications technology (ICT) markets in Africa by value. It shows technological leadership in the mobile software field, security software as well as electronic banking services. As an increasingly important contributor to South Africa's GDP, the country's ICT and electronics sector is both sophisticated and developing. Several international corporates operate subsidiaries from South Africa, including IBM, Unisys, Microsoft, Intel, Systems Application Protocol (SAP), Dell, Novell and Compaq. It is seen as a regional hub and a supply base for neighboring countries. The South African market is price-sensitive, also on the capital goods’ side.
South Africa's ICT products and services industry is penetrating the fast-growing African market. South African companies and locally based subsidiaries of international companies have supplied most of the new fixed and wireless telecoms networks established across the continent in recent years.
The South African Government and the financial sector continue to be the largest players when it comes to IT spending. The South African Government’s budget in this sector focuses on key interventions to increase the usage of ICT to facilitate socio-economic justice and inclusion, improve competitiveness and prepare for the 4th / Digital Industrial Revolution. In April 2019 the President appointed a commission to focus on the 4th Industrial revolution. This commission will assist government in taking advantage of the opportunities presented by the digital industrial revolution. The task commission, which will be chaired by the President, is to identify relevant policies, strategies and action planns that will position South Africa as a competitive global player.
The Government via it’s programs and agencies will embark on an extensive skills development programme aimed at training one million young people by 2030 in Robotics, Artificial Intelligence, Coding, Cloud computing and Networking. South Africa has a data protection law called the Protection of Personal Information (POPI) Act that prohibits the transfer of personal information to a third party who is in a foreign country unless such transfer falls within the ambit of certain exemptions. POPI legislation provided for an Information Regulator (IR), which was established in 2018. The IR is charged with regulating the protection of digital personal information; it published regulations in December 2018 with a one-year grace period for compliance.
Private consumption will rise, but the strong growth of smartphones is likely to offset PC and laptop usage. The depreciated rand could also be responsible for tablets outselling notebooks, a less expensive piece of hardware. It is a strongly regionalized market, due to a lack of inter-city connectivity and infrastructure in parts of the country (rural areas) and it is very price sensitive. However, improvements to network infrastructure and adoption of cloud services and smart infrastructure will see this changing. There is a trend towards greater innovation in applications used for HR and payroll to increase operational efficiencies.
Leading U.S. companies such as Microsoft are elevating South Africa into the lead group of countries for new product releases reflecting the growing importance of the market and the region. IBM opened a IBM Cloud Data Centre in Johannesburg in 2016. IBM will provide clients with a complete portfolio of cloud services. This is the result of close collaboration with South African, 100% black-owned firm Gijima and Vodacom and is designed to support cloud adoption and customer demand across the continent. This again demonstrates the willingness of foreign companies to invest in this market and use the local skills force to penetrate the market and the region. Amazon Web Services has also announced plans to open a data center in Cape Town. CISCO and Dell both have training academies within South Africa to assist with the devlopemtn of skilled labour within this sector.
Sub-Sector Best Prospects
The major worldwide trend of moving toward cloud based systems is one that has gained momentum in South Africa especially with improvements in connectivity and data center infrastructure. The strong entrepreneurial drive within the local IT sector is creating larger demand for cloud based services. Cloud based services and solutions are seen to offer cheaper, safer alternatives and efficiency gains in operations.Machine-to-machine (M2M) communication and the Internet of Things is forecast to grow and is a fairly new development globally and not just in South Africa.
South Africa has a thriving start up and tech market. The South African government via the ICT small, medium and micro-enterprises (SMME) Devlopment Strategy seeks to accelerate the growth and development in the SMME sector. Government support is given to partnerships for incubation, networking and capacity building.
Software
Business software spending may be driven by customer-centric industries such as retail, financial and telecoms, where businesses are recognizing that solutions can be a competitive differentiator. Cloud-based software products are expected to drive growth. This sub-sector is still hampered by piracy and it is estimated by the Business Software Alliance (BSA) that around 35% of installed software in SA is illegal. The need for security products is growing with company spends increasing to about 8% of the total IT budget. The higher end of South Africa’s software market has matured and companies are price sensitive and cautious about investing in new technologies. This may bring opportunities for software that integrates platforms.
E-commerce and related software is showing growth with South African online stores showing the number of online shoppers increased significantly year-on-year. South Africa is still no where near the global estimates of online retialers who make up 10-12% of total retail, South Africa is around 1% of total market for consumer goods. Cybersecurity remains a prevalent concern for South African consumers who rather opt for physical retail purchases. It is currently estimated that only 41% of households have at least one member with access to the internet at home or elsewhere. However, only 10% of households have internet access at home. Here mobile internet adoption has been widespread and provides significant opportunity for e-commerce websites on mobile devices. Mobile penetration rate reached 165% in 2018, although this number may include inactive SIMS.
Broadband access continues to improve due to investments in submarine and terrestrial fiber-optic networks which have increased capacity and coverage. This will continue to be an important factor for spending in this sector. The 2016 StatSA General Household Survey reported a national household internet usage of 59.3%, mainly accessed through mobile devices. The cost of data in South Africa is still relatively high. Some dominant operators charge eight times more per data bundle than in other African countries. In December 2019 the Competition Commission is scheduled to release its final report on it’s market inquiry. ICASA (International Communications Authority of South Africa) is currenlty conducting a Priority Market Study and the South African Government has urged ICASA to prioritise the broadband market.
Smart Cities
South Africa is the leader when it comes to smart city technology in Africa. South African cities recognize that the benefits of smart cities are wide ranging, affecting a broad spectrum of industries and making life easier for residents in a multitude of ways. South African cities: Johannesburg, Cape Town, and Durban are taking the lead with various smart city initiatives and have put into operation some variants of smart city solutions. These cities are open to explore innovative technologies and best practices that are currently been implemented in first world countries.
South Africa understands the need for smart cities and the benefits of thereof relating to country-wide improvements. Quality of life expectations and implementation of best practices across different industries is a fervent goal that pushes for private and public sector cooperation. The South African Local Government Association (SALGA) promotes innovation in Local Government and encourages a mindset of innovation in municipalities nationwide. SALGA’s role is to collect and disseminate knowledge on innovation, to encourage learning, and facilitate the replication of successful practices in different municipalities. Innovation creates connections among communities, government, the private sector and civil society seeking innovative ways to meet social needs. The SALGA captures the essence of South Africa’s country-wide effort.
A number of challenges still stand in the way of smart cities becoming a reality in South Africa. An underdeveloped infrastructure, and skills deficit, for example. This is a particularly vexing hindrance to the advancement of smart cities nationally, requiring well-trained, tech-savvy individuals who understand and can use IT systems. However the South African Government has prioritized the operationalization of the National Rapid Deployment Co-ordinating Center, which brings together government and industry and are looking to sign a memorandum of understanding with the South African Local Government Association. The center is planned to establish a common application system, create a mapping information database of all fibre and electric communication network facility deployments.
The major metropolitan areas such as Cape Town, Johannesburg and Durban have started researching smart technologies geared to smart mobility to address traffic challenges due to an increase in urbanisation.
Opportunities
- There are opportunities within organizations looking for assistance in utilizing efficiencies from cloud computing such as Software as a Service (SaaS) and Infrastructure-as-a-Service. Cloud computing is becoming more important due to improved bandwidth availability, security and lowered cost of broadband, as well as additional internet providers competing in the market. According to Business Monitor International, areas of opportunity for cloud computing include banking and retailing. The improvements in data center infrastructure has resulted in a boost to cloud computing. It is estimated that around 60% of large South Afican companies have implemented some form of cloud computing since 2016.
been high-profile cyber-attacks and hacks on financial, utility, and even political parties. Due to the increase in internet traffic there will be increased demand for IT security products and software within most sectors. As the Internet of Things (IoT) or connected devices grows in popularity so does the threat of cyber hacks/attacks. This comes with an opportunity for cybersecurity related to these products. According to PWC, March 2016, 32% of (reported) organisations in South Africa were victims of cybercrime with 16% not knowing if they were victims or not. Only 35% had a cyber incidence response plan. As South Africa has some of the most developed infrastructure amoungst it’s African neighbours this has lead to an increase in cybercrimes in South Africa. The South African government has undertaken to focus on their Cybersecurity Hub, developing cybersecurity tools and monitor service offerings.
Web Resources
The Department of Communications and Digital Technologies (DCDT)
Website: http://www.doc.gov.za/
The State Information Technology Agency
Website: http://www.sita.co.za/
Computer Society South Africa
Website: http://www.cssa.org.za/Internet Service Providers Association (ISPA)
Website: http://www.ispa.org.za
The Electronic Industries Federation (EIF)
Website: http://www.eif.org.za.
Information Technology Association (ITA)
Website: http://www.ita.org.za
The South African Communications Forum (SACF)
Website: http://www.sacomforum.org.za/
For More Information, the U.S. Commercial Service, South Africa, can be contacted via email:
Kirsten.Bell@trade.gov, Phone: +27 (0)31 305 7600 X329, or visit our Website at http://export.gov/southafrica/index.asp