Despite disruptions in markets around the world, African ICT sectors have remained relatively sheltered, fairly robust and should witness continued growth.
This is the view of research organisation Frost & Sullivan which believes there are several reasons for this, including the fact that – like Latin America – Africa offers investors opportunities that counteract the negative global climate.
“Firstly, Africa’s status as an emerging market destination is expected to stand it in good stead as investors aim for growth markets in these turbulent times,” says Frost & Sullivan ICT industry analyst Lindsey McDonald. “In addition, it is a low cost centre, and it therefore makes sense for international companies to consider relocating certain business processes and facilities to this market.”
These relocations could include manufacturing, customer support and human resource matters. This is a key driver for governments within Africa and Latin America promoting their Business Process Outsourcing (BPO) industries.
“Players from around the world have turned to Africa as a destination for investment,” McDonald says. “Perhaps the best example of this is in the telecommunications sector, where international giants are scrapping for a piece of the very lucrative pie.”
The result has been that lower priced, more advanced solutions have reached the continent, and technology vendors have benefited from the opportunities in an untapped market. In the continent’s mobile sector, companies such as Zain, MTN, Orange, Tigo and Vodacom all enjoy healthy operating margins.
It would seem that the market for IT services in general is also still healthy if the success of South African players such as GijimaAST, Dimension Data and Business Connexion is any indication. However, it should be noted that key markets such as financial services, government, mining as well as oil and gas, are expected to remain the major contributors to ICT spend.
“The alternative business models presented by the Internet are also expected to witness significant growth during this troubled time,” McDonald says. “This is due to the Internet’s ease of use, the fact that it is less cost intensive, and its ability to tap into new talent pools, such as cooperation between Indian and South African counterparts in the BPO sector.”
Governments across Africa have also identified ICT as a priority area for investment and economic development. This is based on the view of ICT as an enabler for the development of other key industries. Concerted efforts on the part of governments have already resulted in significant strides in terms of job creation and investment.
Africa will, however, still feel some negative effects from the recession in developed markets. As it becomes more difficult to borrow money, companies will be forced to cut down on their spending.
“The importance of the ICT sector is, however, such that companies and governments have to find a way to sustain development expenditure as far as possible, as this is essential to economic growth,” McDonald says. “The African ICT industry might see some slowdown in the levels of capital expenditure growth, but this is expected to have only a slight impact on the success of the sector.”