Information and communications technology to South Africa

(Last updated: 12 Jul 2007)

Trends and opportunities

The market

The government has identified that the information and communication (ICT) sector is of strategic importance to the future growth and prosperity of South Africa’s economy. The government recognises that a modern, robust ICT infrastructure is vital for the deployment and success of its socioeconomic initiatives, including:

• Poverty alleviation
• Grant administration
• Education and training
• The national healthcare system

The ICT sector is ranked amongst the top five sectors in South Africa, in terms of its contribution to gross domestic product.

South Africa ’s telecommunications infrastructure is the most sophisticated in Africa, although there are only approximately five million fixed-line telephones for a population of approximately 50 million. There are four times as many mobile phones.

There is wide divergence between the ICT capability and usage across varying population segments and geographic regions. This is also true in terms of IT sophistication across economic verticals. For example, the South African banking system is one of the world's most sophisticated, while there remains a large gap to bridge before true 'sophistication' is reached in the government sector.

The number of Internet users has plateaued at approximately 3.7 million users (in a population of approximately 50 million) and the relatively high cost of broadband access has hampered growth.

In an effort to decrease prices paid by consumers, improve services and increase usage, the government is accelerating its program of ‘managed liberalisation’ of the telecommunications sector, introducing new players in the all sectors to compete with state-owned operators and access existing networks.

The IT services sector is expected to grow at about eight per cent over the next couple of years, to grow to A$6 billion in 2009. IT services account for approximately 40 per cent of total IT expenditure.

South Africa will host the 2010 FIFA World Cup. This event is a key driver for much ICT investment and project planning.

(Source: BMI-TechKnowledge Group)

Opportunities

The opportunities for Australian suppliers are broad, reflecting the needs of a sophisticated but developing ICT sector. The government is funding a nationwide broadband wireless deployment that will provide the infrastructure for voice telephony using 3G cellular technologies.

The strongest growth sectors are expected to be:

• IT security
• IT outsourcing and managed services
• Business process outsourcing (BPO)
• Integration of existing systems including middleware
• Business process management
• Blade servers
• The service provider market – including applications and systems infrastructure hosting  
• Training and education
• Tactical improvements to existing solutions including customer relationship management, supply chain management, and enterprise resource management
• Mobile/wireless environments including application development and management services

Other areas of opportunity include:

• Voice over IP (VoIP)
• Unified messaging
• Data storage
• Implementation of new applications
• Multi-function peripherals
• PC hardware
• Servers
• Packaged software in general
• E-commerce/e-business

(Source: BMI-TechKnowledge Group)

Competitive environment

The South African IT sector is very competitive and with too many competitors in certain sectors. As a result, a strong consolidation drive is expected over the medium term. Successful business strategies will reflect specialisation and focus on niche markets.

Tariffs, regulations and customs

The Independent Communications Authority of South Africa (ICASA) is the regulator for the South African communications sector, responsible for the regulation of broadcasting and telecommunications services.

ICASA’s key functions include: 

• Instituting and administrating regulations and policies that govern broadcasting and telecommunications
• Issuing licenses to providers of telecommunication services and broadcasters
• Monitoring the environment and enforcing compliance
• Resolving industry and public complaints and disputes
• Managing the frequency spectrum
• Consumer protection

The ICT sector is subject to the regulation of the Black Economic Enhancement (BEE) Charter. The BEE Charters were developed as a policy to address the low-level of ownership and control of productive assets and possession of strategic skills by the majority black population, stemming from historical disadvantage. The intent of the policies is to enhance economic development and mitigate against imbalances by enabling meaningful participation of black people in the economy.

The BEE Charter for the ICT sector is working draft document. The charter details target ownership, control, employment and training requirements for the black population in ICT companies operating in South Africa. 

Austrade can assist Australian suppliers in understanding the requirements of the ICT BEE Charter (working draft). 

The Department of Trade and Industry (DTI) is the government agency responsible for trade policies including investment regulations. The South African Revenue Service is responsible for administering customs. 

Industry standards

The South African Bureau of Standards (SABS) provides, promotes and maintains standards in South Africa. SABS is overseen by the Council of the South African Bureau of Standards. The members of the council are appointed by the Minister of Trade and Industry.

Marketing your products and services

Market entry

Local companies are increasingly expanding into international markets to take advantage of South Africa’s relative cost-competitiveness.

South Africa has well-developed and modern infrastructure, and advanced financial operations, among other competitive advantages. South Africa is a prime destination in Africa for investment and strategic collaboration initiatives by the large multinational IT companies.

The South African vendors have proved that they can compete with the best in the world in almost all areas of technology.

For any foreign companies wanting to do business with the South African Government (at national, provincial or metropolitan level) or state-owned enterprises, it is crucial to investigate business relationships or joint ventures with capable black economic empowerment IT partners, in order to qualify for public sector tenders and contracts.

Distribution channels

ICT distribution channels in South Africa are similar to other relatively sophisticated economies and include:

• Direct selling to customers
• Retailers and wholesalers
• Systems integrators for major projects
• Value-added resellers (VARs)
• E-business
• Response to tenders

Austrade can provide advice about the appropriate distribution channels for specific products, and the best means to engage them.

Transport

South Africa has three major international airports: Johannesburg International Airport (the largest), Cape Town and Durban.

The major domestic airports are located in George, Upington, Kimberley, East London, Mthatha, Margate, Pietermaritzburg, Maseru, Bloemfontein, Polokwane, Nelspruit, Phalaborwa, Sun City, Mala Mala and Hoedspruit.

South African Airways is the national carrier.

South Africa has a high quality national road system, which connects the major centres of the country and region. Traffic densities are relatively low.

South Africa has a well-developed rail network providing passenger and freight services. Metrorail and Spoornet, divisions of the state-owned Transnet, are the largest rail operators in South Africa. Metrorail operates the commuter services in South Africa's main urban areas: Johannesburg, Cape Town, Durban, Tshwane, East London and Port Elizabeth. Spoornet provides freight services and passenger services between the major population centres.

South Africa has seven commercial ports. The two largest general ports are Durban and Cape Town.

Links and industry contacts

ICT–related resources

Black Economic Enhancement (BEE) Charters – www.dti.gov.za/bee/beecharters.htm

Department of Science and Technology’s (DST) – www.dst.gov.za

Independent Communications Authority of South Africa (ICASA) – www.icasa.org.za

World Wide Worx – www.theworx.biz

APC.org – http://apc.org

Government, business and trade resources for South Africa

South African Government online – www.gov.za
­South African Bureau of Standards (SABS) – www.sabs.co.za

South African Revenue Service (SARS) – www.sars.gov.za

Statistics South Africa – www.statssa.gov.za

South African Chamber of Business – www.sacob.co.za
Strategic Business Services – www.sbs.co.za

Media

SouthAfrica.com – www.southafrica.com

Contact details

The Australian Trade Commission (Austrade) is the Australian Government’s trade and investment development agency, operating as a statutory agency within the Foreign Affairs and Trade portfolio.

Austrade assists Australian businesses contribute to national prosperity by succeeding in trade and investment, internationally, and promoting and supporting productive foreign investment into Australia.

Austrade:

• Delivers services that assist Australian businesses initiate, sustain and grow trade and outward investment.
• Promotes Australia as an inward investment destination and, with the States and Territories, supports the inflow of productive foreign direct investment.
• Administers the Export Market Development Grants scheme.
• Undertakes initiatives designed to improve community awareness of, and commitment to, international trade and investment.
• Provides advice to the Australian Government on its trade and investment development activities.
• Delivers consular, passport and other government services in designated overseas locations.

A list of Austrade offices (in alphabetical order of country) is available.

More information

For further information please contact Austrade on 13 28 78 or email info@austrade.gov.au

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