New Report Available: South Africa Information Technology Report Q3 2013

From: Fast Market Research, Inc.
Published: Fri Jun 21 2013

Business confidence was largely downbeat in the first half of 2013. We expect this to restrain IT spending among businesses wary of the continued uncertainty over the health and of the global and local economy in South Africa. We therefore retain our view that the government will continue to play a key role in IT spending in the country, accounting for majority of new contracts in value terms. Private consumption growth on the back of wage increases and low interest rates bodes well for IT spending in the consumer segment. However, we expect this to be buffeted by the risks of piracy and counterfeiting in the software market, as well as the threat to PCs and laptop usage from the strong uptake of smartphones.

Full Report Details at

Headline Expenditure Projections

Computer hardware sales: ZAR38.89bn in 2012 to ZAR43.88bn in 2013, +12.8% in local currency terms. We retain the view that migration to Microsoft Windows 8 will provide a boost in 2013.

Software Sales: ZAR16.89bn in 2012 to ZAR18.60bn in 2013, +10.1% in local currency terms. Strong private consumption will drive growth, although this will be buffeted by the prevalence of piracy.

IT Services Sales: ZAR33.11bn in 2012 to ZAR34.39bn in 2013, +3.9% in local currency terms. We expect cloud computing and BPO services to drive the uptake of managed services and outsourcing.

Risk/Reward Ratings: South Africa moved up four places to fifth position on our Q313 MEA IT RRR table, which has been expanded this quarter with the inclusion of Ghana, Kenya and Nigeria. South Africa's aggregate score of 58.3 is a significant upgrade from our last update on the back of a strong increase in its Industry Rewards rating.

Key Trends And Developments

The competitive landscape in South Africa's IT market remains very dynamic with consolidations and the arrival of new players. In May 2013, India's Tech Mahindra opened local operations in South Africa. The company is targeting the telecoms and media sectors with a full range of network and mobility solutions, including design, building, implementation and support services. Also in May, Power Technologies (Powertech), a wholly owned subsidiary of the JSE-listed Altron group, acquired a majority shareholding in QuadPro, a business established to focus on offering turnkey substation solutions into the South African and African market.

South Africa's leading technology firms reported mixed financial results in 2012, with majority reporting sharp decline in profits or widening losses. This is not unconnected to cuts in IT spending by businesses concerned about a weak economic outlook and widespread labour disruptions. We expect this solution to drive further consolidation in the IT market as companies turn to scale to gain and maintain competitiveness.

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