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SA's Internet economy to double

Nicola Mawson
By Nicola Mawson, Contributor.
Johannesburg, 20 Mar 2012

South Africa's Internet economy is expected to leap from being worth R51 billion in 2010 to R103 billion in 2016, according to a new report from the Boston Consulting Group.

Currently, online shopping accounts for about 1.9% of SA's economy and is anticipated to grow to 2.5% by 2016, states the research company's report “The $4.2 Trillion Opportunity: The Internet Economy in the G-20”.

By 2016, the total size of the G-20 Internet economy will be $4.2 trillion, equivalent to 5.3% of gross domestic product (GDP), up from $2.3 trillion or 4.1% two years ago, says the Boston Consulting Group's (BCG's) report, which was released yesterday.

The company's research says that if Internet was a sector, it would be equal in size to utilities such as electricity, gas and water. Locally, about 8.5 million South Africans have online access out of a population of about 50 million, according to World Wide Worx figures.

Vital sector

“The Internet offers one of the world's unfettered growth stories,” said Paul Zwillenberg, a London-based BCG partner and co-author of the report. “A robust Internet economy is an essential underpinning for SA's future, providing both economic and social benefits.”

Two years ago, online shopping accounted for 1.2% of all retail shopping, which the company expects to reach 1.5% by 2016.

However, BCG notes that SA's Internet economy is growing at a slower rate than other developing economies; 12.6% compared with an average of 17.8%. Developed markets are expected to grow at an average of 8.1% through to 2016.

“In 2016, SA will remain at the 17th position in the G-20, with the Internet's contribution to GDP increasing to 2.5%.”

Not so fast

However, Justin Drennan, CEO of local online store WantItAll, says he is not seeing 20% to 30% growth at the moment. He says there is room to drive the online sector as more traditional bricks and mortar outlets move into cyberspace.

In January, online retailers reported growth figures of between 30% and 40% in 2011, with Pick n Pay saying the recent festive season was “the biggest yet” for online retailing.

Drennan hopes to catch some of the boost, but is not holding his breath. He cautions, however, that as more firms move online, advertising spend will increase.

According to BCG, online advertising is expected to grow from $200 million last year to $600 million by 2016 - or from R1.5 trillion to R4.5 trillion.

World Wide Worx MD Arthur Goldstuck previously said online retail had grown at 30% for the past three years and is expected to see a sustained uptake from next year onwards.

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