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IT spending in South Africa is forecast to total R266-billion in 2017, a 2,4% increase from 2016, according to Gartner. Software is predicted to be the best-performing segment, with a 13,2% increase year-on-year.
“South Africa has traditionally underinvested in IT,” says John-David Lovelock, vice-president and distinguished analyst at Gartner. “South African organisations continue to prioritise investments in software, as software spending is the means by which they will catch up with the rest of the world.”
Spending on devices (PCs, tablets, ultramobiles and mobile phones) in South Africa is forecast to decline by 4,6% in 2017. Purchases of devices by businesses and consumers are slowing in the face of rising prices and in the expectation of new products. “However, 2018 is set to be a rebound year,” says Lovelock. “The introduction of premium smartphones will increase device spending by 3,8% in that year.”
Spending on communications services, the largest segment in South Africa, reached R122-billion in 2017, a 0,8% rise. “Price competition between regional carriers, along with extremely price-sensitive consumers, is preventing substantial growth in spending in this segment, despite an overall increase in mobile device ownership,” Lovelock says.
Currency fluctuations against the US dollar can have a deleterious effect on IT spending in South Africa. The cost of most IT products is based in dollars, which means that local prices in rand must increase enough to cover costs and margins in dollars. The higher the dollar cost of a product or service, the more volatile the local price is to currency movements.
“Despite a dip against the dollar in the last few weeks, the rand strength against the dollar has been up in 2016 and this will help curb the recent price increases seen on servers, storage and devices,” says Lovelock.
“South African organisations should learn from their European counterparts. They should embed currency risk into all IT contracts, ensure long-term contracts are priced in rand, and seek local delivery, where possible.”