IT spending in South Africa is forecast to reach $26,6-billion in 2016, an increase of 5,1% from 2015, according to Gartner. While the IT market is on pace to pick up in 2016, 2015 is proving to be a difficult year for many market segments in South Africa.
“South Africa has suffered currency effects, as did many developing markets this year,” says Wil Hahn, principal research analyst at Gartner. “There were also impacts on communications service providers (the largest IT market segment in terms of spending), as they faced regulations that imposed decreased rates for interconnection and experienced the accelerating decline of fixed services revenue.”
In 2016, IT spending in South Africa will return to growth. “Spending on devices will show the highest growth in 2016, up 13% from 2015, while spending on communications services will remain the highest overall — reaching $11-billion.”
Despite its relative wealth and sophistication, South Africa’s future IT market opportunity remains uncertain due to several serious constraining factors.
“Chief among these are shortfalls in electric power supply, uncertainty and delays regarding large mergers and acquisitions, deterioration of the local currency against the dollar and euro, and ongoing labour disputes in key market sectors,” says Hahn. “These and other contributing factors have led to low business confidence and increased concern that other locations in Sub-Saharan Africa – chiefly Nigeria or Kenya – could someday overtake South Africa as the chief ‘hub; market for regional investment.”
Nevertheless, while other locations’ markets grow more quickly (particularly in communications), South Africa’s market remains much more mature and sophisticated. South Africa’s IT market revenue is small compared with Brazil, Russia, India and China (the other four emerging BRICS markets), but its spend per capita is still very high.
With the device segment outpacing all other segments for spending growth in South Africa, IT spend on the mobile devices sub-segment is certainly growing faster than any other area. Gartner predicts that annual spending on mobile phones will break the $5-billion mark by 2018. South African mobile app developers are well positioned to take full advantage of this growth, as well as to deliver relevant offerings further into the African continent, taking advantage of the burgeoning markets to the North.
“South African companies have a rich understanding of both the needs of African communities and the complexities associated with their cultural and language diversity. Local developers also have the world-standard engineering skills required to develop services for Africa,” says Richard Marshall, research director at Gartner. “This is not simply about technology for the sake of it, but technology designed to address the unique challenges of African communities. These are challenges that many European or American companies are just not familiar with.”
“South Africa has some interesting innovation emerging,” Marshall adds. “Good engineering and an understanding of the local markets could see some game-changing African developments emerge during the next few years.”