While South Africa’s projected GDP growth for this year is 0.6%, exacerbated by loadshedding’s impact on business confidence and real per capita growth is actually negative, there is still opportunity to make money within ICT services – and infrastructure services in particular.
At the IDC Directions 2020 event hosted in Johannesburg this week, Gina Schoeman, director, economist and head of research at Citibank South Africa, said that things are tough and South Africa is “in dire straits” economically, with the need for economic growth, expansion and jobs becoming increasingly urgent.
According to the Bureau for Economic Research (BER)’s Business Confidence Index in Q4 2019, business confidence dropped to 21 in Q3 of that year.
Schoeman said if the score is 50 or below, the majority of businesses are pessimistic.
The real concern is data reflecting business confidence versus private sector fixed investment (real ‘on-the-ground capex investment), with low confidence impacting investment, she added.
“Confidence is such an important variable when it comes to boosting economic growth,” said Schoeman.
Schoeman also emphasised the impact of socio-political events on the country’s economy, that culminate to make it more volatile, and referred to several scheduled events in 2020 including the country’s February national budget, Moody’s rating decision on South Africa and the ruling party’s (African National Congress) national general council meeting this year.
In reflecting on the extent to which South Africa’s socio-political climate has changed, Schoeman said the council meeting has evolved from what was initially a two-year update on progress of policies made in 2017 …. “…. now it has become a platform to see just how strong our President is within his own party.”
“As a South African economist with a whole heap of global clients, represented by Citibank, I get asked all the time ‘is Ramaphosa even going to finish his term?’…. these things we cannot predict, we can follow what happens and try and work it out from there, but there is a difference here – a one term president can only do a certain amount of reform. The perception that he is going to be a one-term president increases uncertainty.”
Against this backdrop and economic insight, the IDC referred to areas of potential opportunity for businesses.
Jyoti Lalchandani, Group Vice President & Managing Director (META), IDC, emphasised the opportunities within the region as digital transformation takes hold, especially within the telecommunications market.
Lalchandani said there is a tremendous amount of tech spending still taking place in transforming the enterprise to digital, with 16% CAGR expected within the MEA region.
The focus is now on data, on AI, 5G and cloud as underpinning this transformation, with C-suite executives expected to play a greater role in this process within the business. The IDC also stressed the elevated role- and contribution of line of business managers as IT and business silos become more aligned.
He said that spending within IT and telecommunications is expected to grow at a CAGR of 5.9% between 2019 and 2023, to cross US$5-billion by 2022.
Mark Walker, Associate Vice President, Sub-Saharan Africa, IDC MEA and Turkey, acknowledged the difficult economic climate, but added that businesses need to understand the situation clearly and making the best of it.
This means truly innovating, engaging and servicing clients better, and utilising technology more strategically he said.
In terms of the size of ICT markets, South Africa is expected to grow by 2.5% and generate US$28-billion, Nigeria he said represents a big opportunity with 5.0% anticipated growth and Kenya with 3.6% growth.
Walker also acknowledged increased focus and attention on the Ethiopia market, but stressed that local partnerships and a deep understanding of the cultural dynamics are prerequisites.
Finance, government and manufacturing continue to represent the biggest investors in technology in South Africa.