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Cape Town, South Africa, September 14, 2015 View All Press Releases

Gartner Says IT Spending in South Africa to Reach $26.6 Billion in 2016, Up 5 Percent from 2015

Analysts to Discuss How to Drive Business Growth at Gartner Symposium/ITxpo 2015, September 28-30 in Cape Town, South Africa

 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. 

"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 subsegment 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. 

"South African companies have a rich understanding of both the needs of African communities and the complexities associated with their cultural and language diversity. Local developers also have the world-standard engineering skills required to develop services for Africa," said Richard Marshall, research director at Gartner. "This is not simply about technology for the sake of it, but technology designed to address the unique challenges of African communities. These are challenges that many European or American companies are just not familiar with." 

"South Africa has some interesting innovation emerging," said Mr. Marshall. "Good engineering and an understanding of the local markets could see some game-changing African developments emerge during the next few years." 

More detailed analysis is available in the report "Emerging Market Analysis: South Africa Encounters Challenges as a Regional IT Leader". 

Gartner analysts will further speak about future trends in IT at the Gartner Symposium/ITxpo 2015, September 28-30 in Cape Town, South Africa. Additional information from the event will be shared on Twitter at https://twitter.com/Gartner_Events and using #GartnerSYM. 

Gartner Symposium/ITxpo is the world's most important gathering of CIOs and other senior IT executives. IT executives rely on these events to gain insight into how their organizations can use IT to overcome business challenges and improve operational efficiency.

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