The information and communications technology (ICT) sectors in South Africa have returned to health, according to a new study released this week.The 2005 edition of the Map of the IT and Telecoms Sector (MITTS), a joint research study of the ICT market by independent research houses World Wide Worx, Razor’s Edge Business Intelligence and Trigrammic, reports that the tide of loss-making by public ICT companies has turned. This is partly due to the delisting of some of the worst-performing companies, but mainly a result of better management and a better economic environment.
While four of the 37 listed companies included in the survey made a loss in 2004, this is down from more than a quarter in 2001, and compares well with other sectors.
Companies that were subsequently suspended or delisted from the JSE Securities Exchange would have worsened the picture for the 2001-2003 period, and emphasise the extent to which a more healthy picture emerged in 2004.
The profits reported by the surviving companies has doubled from 2002, and more than trebled from 2000 – from R5.4bn to R18.8bn. Turnover of these companies has more than doubled since then, from R61bn in 2000 to R129bn in 2004, although it has dipped marginally from the high of R131bn achieved – albeit with a lower profit margin – in 2003.
The market analysis of listed ICT shares in the report shows that share prices of ICT companies increased by 30% in 2004, compared to the American tech-heavy Nasdaq index falling by more than 10% in the same period.
“These figures confirm the conclusion of this report – that technology is once more a healthy business in South Africa,” says Arthur Goldstuck, managing director of World Wide Worx. “This is great news both for the ICT sector and for the economy as a whole.”
Says Dr Jonathan Miller of Trigrammic, “The study also underlines the extent to which ICT developments have come to affect the entire South African
economy. Government policy may appear to deal largely with infrastructure issues like the roll-out of telecommunications, but in fact it is far broader and deeper.”
The report points out that government ICT policy is both vertical, in dealing with policies governing sectors like education, tourism, manufacturing, and health, among others, and horizontal, tackling issues
like data privacy, freedom of information, tariffs and pricing, and government procurement.
“This means that, when the ICT sector is healthy, the whole economy is in a better shape,” says Dr Miller.
And it’s not only the big picture that is improving.
“When we examine each of the individual sub-sectors within ICT, we see turnaround and growth across the board, for listed and unlisted companies, national and multinational,” says Goldstuck. “At the same time, most companies are still cautious about the short-term future, as their memories are not too short for them to forget the over-confidence that led to the last slump. That does make for a healthier sector, however, and it is focused on delivering value rather than vision.”
Some sectors face greater uncertainty, however. For example, the price of PCs remains a barrier to the access to ICT for the great majority of the population, and the growth of open source software is expected to be both a threat and an opportunity for the established software industry, while the ICT BEE charter has the potential to reshape the industry.
Some sectors, such as networking, have lagged behind in overall growth, largely due to regulatory constraints, which are beginning to ease. This has
had a knock-on effect on sub-sectors like enterprise resource planning and the outsourcing industry, with call centres unable to exploit their potential international market to the full.
Nevertheless, call centres are among the sub-sectors poised for stronger growth than average, thanks to the deregulation of Voice over IP, while growth in security and disaster recovery will be driven both by demands on corporate governance and a major increase in Internet attacks.
The study includes detailed overviews of the ICT BEE Charter, the legal framework for ICT in South Africa, and the technology roadmapping process of the Department of Science and Technology. It provides a comprehensive overview of trends, issues, factors and policies that will have an impact on ICT in South Africa in 2005 and 2006.