SA ICT Market Growth in 2020 – 2022 (BMIT)
According to BMIT’s latest South Africa ICT Market Sizing and Overview Report, revenue in the ICT sector grew by almost 5% during 2022. However, growth across different segments was very uneven, with some industry segments seeing exceptional growth, whilst others have declined.
Chris Geerdts, BMIT’s Managing Director, says the industry performance could have been far better if not for the ‘triple whammy’ of load shedding, which hit businesses hard, impacted the reliability of ICT services and pushed up costs, as service providers had to increase their battery backup investments and also burn diesel for hours each month.
The performance breakdown is given in BMIT’s market summary chart for the last three years (see graph above) which also highlights the uneven growth per sector.
The sector as a whole grew a healthy 7.3% in 2022, although most of this growth came from IT software and services, especially from public cloud services, which have seen a revenue increase of almost 40% per year, for two years running.
Mr Geerdts said that cloud solutions had enabled organisations to retool rapidly to ensure business continuity, when lockdowns were put in place, and there has been a very strong ongoing preference for cloud-first solutions. However, he warns that local players, who provide traditional IT services, have been put under pressure, while hyperscale players continue to reap the rewards of their local investment in cloud services. Ironically, load shedding has precipitated the move to cloud but also increased the overall downtime of the connections businesses need to access those cloud services.
The need for cybersecurity is a primary driver of growth in IT Services, including concerns regarding data security and privacy, which combine as a top priority for many companies. Enterprises are presenting a massively expanded cyber attack surface as they undergo digital transformation, with commensurate increases in remote work, cloud and IoT, and more data being kept online. The increase in frequency and severity of cyber attacks is forcing companies to re-appraise their approaches at a fundamental level, going beyond merely ‘securing the perimeter’ and aligning security more closely with business objectives.
BMIT’s own survey of enterprises showed that a Zero-Trust security framework and Secure Access Service Edge (SASE) are the top newer technologies larger organisations have implemented, with another 30% of these respondents indicating their intention to implement these technologies.
Artificial Intelligence (AI)
BMIT notes that AI is rapidly becoming mainstream, with natural language-based AI including large language models such as Chat-GPT further accelerating this trend. They are assisting in many areas of professional activity, including software development and as an aid to creativity in many areas, such as marketing.
OEMs are constantly enhancing automation, delivering solutions, and making strategic acquisitions. Hyperscalers now bake AI into many of their cloud solutions. AI also enhances cyber security and is enhancing data analytics, providing insights that traditional approaches would not have identified.
BMIT forecasts the growth outlook for 2022 – 2027 at 12.3% CAGR for Cloud services and other IT Services combined.
Hardware sales, on the other hand, have now slowed down dramatically, following the surge in demand for PCs during the pandemic, and further overall hardware refresh spending in 2021. It appears that the move to Windows 11 has failed to drive demand for new PCs whilst the education sector is one of the few areas to still show positive demand. BMIT’s research identified Government procurement processes as an ongoing challenge to growth in the hardware market.
Revenue growth in the telecoms sector was more modest than for IT, but positive nevertheless, at 2.6% year-on-year.
The business segment saw a slight bounce-back in 2022 following softening of the market in 2020 and 2021. The load shedding ‘triple whammy’ was particularly evident in this segment, where businesses require highly reliable links for their mission-critical applications, and even more so now that their applications have been migrated to the cloud and where security depends on connectivity to monitor, and respond to, threats.
Business fixed data services growth also continues to be dampened by the move to lower-cost broadband connectivity and substitution of traditional VPN services by SD-WAN, even though overall demand for connectivity is increasing.
The FTTH market was a strong driver of growth, in spite of consumers feeling the pinch, as work-from-home remains popular and the spirited fibre ‘land grab’ has continued apace, shifting from leafy suburbs (which are now all but covered) to smaller towns. There is also a widespread shift in focus ‘down the pyramid’ to lower-income suburbs, where some interesting deployment models based on pay-as-you-go (and even ‘pay-as-you-can-afford’) principles are emerging, which could expand rapidly if they prove to be feasible and scalable. Nevertheless, coverage gaps remain a barrier for those in under-served areas, where fixed-wireless services continue to be an important gap-filler.
Mobile operators are being forced to adjust their businesses as voice revenues decline while the rate of growth in data services is moderating. The shift from voice to data revenues trend is expected to continue. Meanwhile, operators are successfully unlocking new revenue streams from content and financial services.
They are also enabling MVNOs on their networks, inter alia in fulfilment of their obligations attached to the new spectrum awarded to them in 2022. The rise of MVNOs is a global trend, which has been slow to take off in South Africa until recently.
Mobile operators are investing heavily to increase the uptime of their sites during load shedding, whilst battling with battery theft in urban and remote sites.
What is evident from the projections in the Report is that while certain ICT business areas have shown muted growth, others have seen strong performance. In some cases, the growth is a temporary correction, whilst in others it is part of a new or sustained trend.
Loadshedding has impacted the industry at many levels. Service providers and customers are adapting to daily power outages but there is uncertainty about what stages they should be planning for. However, the ICT market continues to grow as it remains critical to all sectors of the economy, and ‘keeping the lights on’ takes on a new meaning, both literally and figuratively.