The South African IT sector is growing at a healthy 8.5% per annum and is expected to reach R77 billion by the year 2010. The market is where it should be in terms of revenues, development and market performance in relation to other emerging markets.

However, we need to guard against becoming irrationally exuberant as there remains much work to be done in order to realise real South African market potential.

The reality of the South African IT market is that we have historically been a distribution economy, often referred to as “box droppers”. For the market to grow further, a fundamental shift is required, which will see us moving towards a research and development type environment, as well as starting to focus more on the software and services components of the industry.

In 2005 the local IT market was buoyed by demand from high-end users, the so called replacement cycle gaining momentum, and the emergence of the black middle class.

However, of great concern is that fact that according to the World Economic Forum (WEF), SA is in the lower 50th percentile when it comes to issues such as the quality of education, the quality of maths and science education and quality of schools. The development of critical skills is of the utmost importance in being able to further develop our ICT potential.

On a brighter note, SA was ranked in the top 30th percentile of technological sophistication, government online services and laws relating to IT.

Looking to 2006 and beyond, the continued growth of the sector will be driven by among other things, government projects; most notably the Accelerated and Shared Growth Initiative for SA (AGISA), the FIFA World Cup in 2010, foreign investment, the second national network operator (SNO) and the mass adoption of broadband services.

The AGISA project is expected to total R370 billion with an estimated R30 billion being allocated to IT related investments over the life of the initiative.

A serious market inhibitor will be the need for SA to effectively align the business and technological priorities. This implies that IT suppliers need to earn the trust of being a true business enabler in the eyes of the business user and become more competitive on a global scale.

A facet of the South African IT market that has been largely ignored has been that of the small and medium enterprises (SMEs), which are not driven by technology, do not see the strategic advantages of IT, and often are unable to afford the high maintenance and service level agreements. The ability to service this space will be based on being able to gain an understanding of the client’s business and delivering a simple yet effective solution on a cost effective and replicable basis.

In addition an element of IT development that is sorely lacking in SA is the absence of venture capital funds, which are significantly different from the traditional merchant baking type facilities now available.

ITWeb Market Monitor