By accelerating the adoption of cloud, the South African market could potentially unlock R3,9-trillion of additional economic value over the next decade (2023-2033), representing 4,05% of South Africa’s cumulative gross domestic product (GDP).
This is according to a study commissioned by Amazon Web Services (AWS), which quantifies the relationship between public cloud computing adoption, national productivity, and economic growth in South Africa. It calculates the aggregate productivity gains realised by economies that adopt cloud computing and extends previous economic research focused on firm-level productivity by establishing cloud adoption as a driver of national productivity and economic growth. The research was performed by Telecom Advisory Services, and directed by Raul Katz, director of business strategy Research at the Columbia Institute for Tele-information (Columbia Business School).
In 2021, cloud adoption made a significant impact on the South African economy. According to the report, it contributed 0,18% to the regional GDP, generating an economic value of R14,3-billion. Over 78% of this impact can be attributed to the national productivity gains or so-called “spill over effects” on the economy. The remaining 22% is driven by cloud spending from both public and private organisations.
On average, South Africa experienced a 0,06% increase in GDP for every 1% increase in cloud penetration. It was found that South Africa has the highest economic growth due to cloud adoption in sub-Saharan Africa (SSA), with 1% increase in cloud penetration yielding 0,06% increase in GDP growth, three times more than the sub-Saharan Africa average.
Dr Katz explains: “Until recently, research on the economic impact of cloud was focused at the firm-level, understanding the microeconomic benefits associated with cloud adoption (for example, capital efficiency, contribution to product development, and the like). These studies, while valuable, did not quantify the aggregate effect of cloud on the economy in a similar way to what has been done in areas such as broadband Internet. To address this gap, our team at Telecom Advisory Services developed a state-of-the-art econometric model, leveraging global series of data on cloud adoption between 2014 and 2021.”
Amrote Abdella, GM: sub-Saharan Africa at AWS, says: “This report underscores the immense potential for South Africa, and the SSA region, to harness cloud computing and expedite economic growth. By increasing the current average cloud penetration, the region can unlock additional economic value. AWS is committed to supporting its customers and partners in South Africa throughout their cloud journey. We firmly believe that cloud technology will be crucial in driving innovation, boosting productivity, and scaling businesses in the region over the next decade.”
The study demonstrates that the economic impact of cloud computing is guided by returns to scale – greater adoption of cloud computing will lead to proportionally greater productivity gains and economic impact.
In 2021, only 34% of organisations in South Africa embraced cloud computing, significantly lower than the adoption rates of 49% in Western Europe and North America. This presents an opportunity for the country to enhance its cloud penetration and reap substantial benefits.
“With the current forecast, the economic impact of the cloud is undeniable and is poised as a key catalyst for economic prosperity. As such, it is important for businesses in the region to invest in cloud computing technology to stay competitive and boost their economic potential,” adds Abdella.
The report identifies four key advantages of cloud computing: it enhances business efficiency and effectiveness, streamlining processes and improving outcomes; it offers access to a wide range of services, enabling businesses to leverage advanced technologies; it boosts productivity by facilitating collaboration, mobility, and agility within the workforce; and promotes environmental sustainability by reducing carbon emissions per unit of data transmitted.