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South Africa Information Technology Report Q3 2011 Published on July 2011
Report Summary Market Overview BMI expects South African IT spending to increase from US$11.9bn in 2011 to about US$19.0bn in 2015, faster than real GDP growth. Despite a drop-off in IT investment associated with the 2010 FIFA World Cup, other major infrastructure and transport projects will continue to provide a framework for growth during BMI's five-year forecast period. In 2011, a brighter outlook is forecast for the household PC segment, in a context of low interest rates, ongoing wage increases and rising asset prices. South African businesses are expected to maintain a cautious attitude to IT investments, due to continued global economic uncertainty. The 2011-2015 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. Industry Developments 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. In November 2010, the South African government announced incentives to attract business process outsourcing (BPO) firms to challenge India's long-term dominance of the sector. The government has offered tax rebate of 12,000 rand for every job created in the sector. The government is keen to win a larger share of the global outsourcing spending for 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 2010, PC vendors Dell, HP, LG, Pinnacle, Sahara, Vodacom, MTN, Lenovo, Fujitsu-Siemens, Cel C, Mecer, and Telkom were among those selected by the South African government as accredited suppliers for its Teacher Laptop Initiative. Under the initiative teaches will have a choice of packages ranging from SAR250 to SAR390, and they will receive a subsidy of SAR130, but have to pay the remaining sum. Meanwhile, 2011 is expected to see more vendors release tablet notebooks following the success of Apple's iPad. The device, from US consumer electronics giant Apple, did not officially reach South Africa until February 2011. Early interest was reported to be high, and led rapidly to the South Africa release of the iPad2 in April. Several hundred iPad2s were sold by Apple's retailer within hours of the April launch. In 2011, IT services firms will target the emerging cloud computing opportunity, which has attracted a number of players into the market. In Q410, new telecoms service provider ARC Telecoms launched in South Africa with plans to provide connectivity, managed services and applications delivery through cloud computing. ARC signed agreements with telecoms carriers such as Telkom and Vodacom, and was targeting the small and medium business market. Computer Sales South Africa's computer hardware market is forecast to grow at a CAGR of 11% over BMI's five-year forecast period from an estimated US$5.3bn in 2011 to US$8.0bn in 2015. Computer sales were one of the drivers of rising retail sales in mid-2010, according to local data. 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
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>> Get this Report Now by email! boosted PC unit shipments, along with aggressive retail promotions. Software The software market is forecast at around US$2.2mn in 2011 and, boosted by economic growth and new regulations, is projected to have a CAGR of around 14% over the 2011-2015 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 (ERP) 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 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 2011 and is expected to grow to around US$7.3bn in 2015. During 2010, IT services vendors reported increased client spending in key segments. 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 ' scheduled for completion in 2011 ' and the deployment of new network infrastructures to rival Telkom's national network.
Table of Content Executive Summary 5 SWOT Analysis 8 South Africa IT Sector SWOT . 8 South Africa Telecommunications Sector SWOT 9 South Africa Political SWOT 10 South Africa Economic SWOT 10 South Africa Business Environment SWOT . 11 IT Business Environment Ratings 12 Middle East & Africa 12 Regional IT Business Environment Ratings 15 Middle East and Africa IT Markets Overview . 16 Market Growth And Drivers . 18 Sectors And Verticals 20 South Africa Market Overview 23 History and Market Structure . 23
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>> Get this Report Now by email! Hardware 25 Software 27 Services . 29 End-Users . 31 Industry Developments . 33 Industry Forecast Scenario . 38 Table: South Africa's IT Industry ' Historical Data And Forecasts (US$mn unless otherwise stated) 41 Country Context . 42 Table: Consumer Expenditure, 2000-2012f (US$) 42 Table: Rural/Urban Breakdown, 2005-2030f . 42 Country Context . 43 Table: Rural/Urban Breakdown, 2005-2030 43 Table: Consumer Expenditure, 2000-2012 (US$) . 43 Internet 44 Telecoms Sector ' Internet ' Historical Data & Forecasts 44 Macroeconomic Forecast . 46 South Africa ' Economic Activity . 48 Competitive Landscape 49 Hardware 49 Software 50 IT Services 52 Internet Competitive Landscape . 54 Company Profiles 55 IBM . 55 Sahara Computers 57 BMI Methodology 59 How We Generate Our Industry Forecasts . 59 IT Industry 59 IT Ratings ' Methodology . 60 Table: IT Business Environment Indicators 61 Weighting 62 Table: Weighting Of Components . 62 Sources . 62
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