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SA tops digital evolution list

Bonnie Tubbs
By Bonnie Tubbs, ITWeb telecoms editor.
Johannesburg, 20 Nov 2014
SA's digital economy is the most developed in Africa.
SA's digital economy is the most developed in Africa.

Despite ranking 33 out of 50 in terms of digital readiness and the well-known ICT challenges SA continues to face, the country has emerged as the world's fourth fastest growing digital economy, behind China, Malaysia and Thailand.

MasterCard has tagged SA's digital economy as the most developed in Africa, and one of the fastest growing in the world, according to the new Digital Evolution Index developed by MasterCard and The Fletcher School at Tufts University. The Index shows how 50 countries have progressed - and in some cases matured - on their way to becoming digital economies.

Ted Iacobuzio, vice-president of global insights at MasterCard, says SA's speed of growth can be attributed to the rapidly increasing proportion of the population with Internet access, an 86% adult mobile phone penetration rate, and a highly developed telecommunications network.

"What is significant is that all four of the African countries measured - SA, Egypt, Kenya and Nigeria - share a common trait of moving at a high rate of speed toward digital evolution, demonstrating huge growth potential for e-commerce."

Egypt (48/50), says MasterCard, has the potential to be one of the top 10 fastest evolving countries globally in the next five years. Although economic conditions hold Kenya (49/50) back, the country has "great potential" for digital commerce, while Nigeria (50/50) showed the most potential for digital growth due, in part, to the Central Bank of Nigeria's cashless policy.

BMI-TechKnowledge analyst Tim Parle says, while SA's position as leading African country is commendable, there is a lot of room for improvement. "We also lead the BRICS [Brazil, Russia, India, China, and SA] group, but there must be scope to make the top 30."

Arthur Goldstuck, MD of World Wide Worx, says SA's top spot comes as a "pleasant surprise", which bears out the growth the country is seeing in smartphone adoption. However, he warns, digital readiness should not be confused with digital activity. "The fact that the market is ready doesn't necessarily mean it is an active market."

Mobile growth

Meanwhile, Ericsson's latest Mobility Report - an update on mobile trends leveraging big data from live networks worldwide - shows Africa has topped 880 million mobile subscriptions for the third quarter of the year, while commercial deployment of 5G technology is expected by 2020.

Fredrik Jejdling, president and regional head of Ericsson sub-Saharan Africa, says the increased availability of low-cost smartphones in the region will lead to a rapid increase of smartphone subscriptions.

"However, GSM/EDGE-only subscriptions will remain the most common subscription type for the next five years due to the high numbers of lower income consumers using 2G-enabled handsets." Ericsson predicts that, by 2020, 85% of Middle East and Africa mobile subscriptions will be 3G and 4G.

Parle says there is still considerable room for growth in SA's smartphone sector. "South Africans appear to be very brand conscious and we haven't yet reached the tipping point where the non-mainstream smartphones are popular. The recent introduction of network-branded smartphones such as the MTN Steppa and Vodacom Kicka may reverse that trend."

5G potential

Ericsson says 5G is expected to be commercially deployed in 2020, and the technology is predicted to have a faster uptake than long-term evolution, just as it had a faster uptake than 3G. "The difference here is that, in addition to new radio technologies, 5G will also encompass evolved versions of existing radio access (such as 3G and 4G), cloud, and core technologies to cater for the thousands of new ways that mobile technology will be used."

5G growth will be driven to a large extent by new use cases, especially in machine-type (machine-to-machine, or M2M) communications. Goldstuck explains 5G is regarded as ideal for the Internet of things, and is not so much a consumer-focused technology.

"The emphasis over the last few years has been optimising connectivity between people, so as that moves ahead in dramatic bursts, we will start seeing a bigger emphasis on connecting devices, machines and data collection points."

Parle notes 5G pilots are already under way in some countries, and much of the radio equipment recently deployed (including in SA) is software definable - so it is plausible to expect commercial 5G in the next five years.

Key takeaways

1. By 2020, 90% of the world's population over six years old will have a mobile phone.
2. Smartphone subscriptions are expected to top 6.1 billion by 2020.
3. Mobile subscriptions in Africa reached 880 million in the third quarter of 2014, with mobile penetration of 77%.
4. 26 million new subscriptions added in the third quarter of 2014 in Africa.
5. Mobile video traffic is set to increase tenfold and constitute 55% of all mobile data traffic by 2020.
6. SA ranks 33 out of the 50 countries measured by MasterCard's index in digital readiness.
7. Africa's Internet penetration stood at 16% (167 million people) in 2013, and is expected to reach 50% (600 million people) by 2025 - a quadrupling of the online consumer market.
8. There are currently 2.9 billion Internet users in the world - a feat that took 20 years to achieve.
9. The next billion Internet users will enter the market much faster than this. A significant proportion of these will come from Africa.
10. SA's speed of growth can be attributed to the rapidly increasing proportion of Internet users, an 86% adult mobile phone penetration rate, and a highly developed telecommunications network.

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