IT has a crucial role to play in the continued growth of the South African economy.
As economic imperatives move away from consumer spending towards investment and job creation, IT has an important role to play both in building out infrastructure and increasing productivity in the industrial sector.
Dr Azar Jammine, director and chief economist at Econometrix, explains that South Africa has enjoyed solid economic growth but, to date, most of this growth has come from consumer spending rather than on extending fixed investments.
Dr Jammine was the keynote speaker at the official launch of Futurex & Equip, which will be taking place from 15 to 18 May at the Sandton Convention Centre.
He characterises consumer spending as individuals buying goods and services; while investment spending leans more towards machinery, buildings, civil engineering, trucks and IT.
"The latter could be considered 'good spending' and, in theory, should enhance the country's ability to provide goods and services more effectively."
Although spend has increased in both areas, Dr Jammine points out that much of the consumer spending has been on imported goods, which is not conducive to creating jobs in our own manufacturing sector.
This has had a positive knock-on, however, as the rand has seen some depreciation this year which, in turn, has stimulated some investment spending.
"We are starting to see a gradual shift towards investment rather than consumer spending," Jammine says.
At the same time, government is working to stimulate more investment in infrastructure.
"What this will do is shift the IT focus away from the individual and towards the IT that is needed to help produce electricity, transport or civil engineering. Or towards investment in IT that makes up the infrastructure itself, such as telecommunications networks."
To ensure continued economic growth, Dr Jammine believes companies need to start investing in making South Africa competitive on the manufacturing front.
"At the end of the day, we have become highly dependent on imports, and also increasingly dependent on foreign willingness to invest in South Africa – either directly or by buying shares on the stock exchange."
Buying imports means the country needs to find the foriegn exchange to pay for them and Dr Jammine says this has come in the form of a windfall in foreign investment.
"We have been blessed by a bit increase in commodities prices as a result of insatiable demand from China and India.
"Also helping to drive them is that the global economy, led by the US, has been booming as a result of interest rates being so low for so long."
Some developing markets – notably China with its manufacturing capacity and India with its IT and call centre services – have cashed in on the boom times to develop their industries to lead in the international arena.
"The problem with South Africa is that, while other developing countries export more than they import, we are the other way around – so we are more dependent on capital inflows. Yes, commodity prices have helped, but they can only go so far."
The need to create jobs is critical and currently one of the biggest weaknesses in the South African economy, Dr Jammine explains.
"The profile of skills in South Africa shows that there are millions of unskilled people compared to a relative shortage of skilled people. And yet we are directing the economy away from those sectors that can absorb unskilled labour – like mining, manufacturing and agriculture – towards areas like IT, transport, communications, financial services, distribution, tourism and other business services, all of which require a high level of skills of which there is a shortage.
"Meanwhile there are millions of unemployed – in fact, unemployable – people out there."
Against this backdrop, Dr Jammine says there is an increasing groundswell of opinion that says the country needs to change its industrial strategy to favour those sectors of the economy that are able to create jobs more readily.
And IT has a role to play in this scenario, too, as companies may switch to investing in the kind of computer systems that can help them manufacture more effectively.
"Many argue that the rand exchange rate is too high to make manufacturing viable within our relatively small market," says Dr Jammine. "However, if technology were more effectively employed, the sector could become that much more competitive."
Dr Jammine stresses that the use of computers in the manufacturing and industrial sectors – even mining and agriculture – is not with the aim of "downsizing" or shedding jobs, but rather to increase productivity and competitiveness to create more jobs.
Currently, job creation is growing at about 3% to 4% per year, although the economy is growing at about 5% and expenditure at 8%, which means the unemployment gap is actually growing.
The 2010 Soccer World Cup could provide a major kick-start to the South African economy, especially if the momentum is able to continue beyond the actual event, Dr Jammine adds.
The actual amount that government has earmarked to spend – R8-billion – is a drop in the ocean, he says.
"However, the general build-up and excitement around the World Cup could create confidence and the economy should have a good time until at least 2010," Dr Jammine says.
"From an IT point of view there will be an obvious demand to equip broadcasters, logistics, ticketing – all kinds of activities will be touched by IT."
In addition, some of the infrastructure projects planned for 2010 will extend beyond the World Cup and help to sustain the economy going forward.
Jo Melville, MD of Futurex & Equip organiser Exhibitions for Africa, adds that one of the key goals of Futurex & Equip is to contribute to the use of IT in all aspects of business – from infrastructure to manufacturing and industrial systems and including even the smallest resellers who help to create jobs and improve the economy.