IT Spending in SA to reach $26.6bn in 2016

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IT spending in South Africa is forecast to reach $26.6 billion in 2016, an increase of 5.1 percent from 2015, according to Gartner, Inc. 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. By Staff Writer


 

 “South Africa has suffered currency effects, as did many developing markets this year,” said Will 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 (see Table 1). “Spending on devices will show the highest growth in 2016, up 13 percent from 2015, while spending on communications services will remain the highest overall — reaching $11 billion.”

Table 1. South Africa IT Spending Forecast by Sector (Millions of US Dollars)

2015

 Spending

2015

Growth (%)

2016

Spending

2016

Growth (%)

Devices 5,568 6.7 6,294 13.1
Data Centre Systems 635 -3.2 666 4.9
Enterprise Software 1,869 -1.0 2,042 9.3
IT Services 6,311 -5.0 6,544 3.7
Communications Services 10,949 -9.1 11,075 1.2
Overall IT 25,330 -4.3 26,620 5.1

Source: Gartner (September 2015)

 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,” said Mr. 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.

Email TechFinancials.co.za at editor@techfinancials.co.za

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