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(011) 807 3294   itnews@itweb.co.za | Advertise on ITWeb   Sat, 25 Oct, 20:57:39 PM

SA's Internet economy quantified

SA's Internet market has the potential to be one of the new building blocks of the economy, says World Wide Worx MD Arthur Goldstuck.

A new study has found the local Internet economy contributes R59 billion, or 2%, to SA's total GDP. The total consists of all expenditure by consumers, small and medium enterprises (SMEs) and government on products and services via the Internet, as well as on Internet access and infrastructure.

The Internet Economic Impact Study, conducted by World Wide Worx, was commissioned by Google SA with the intention of quantifying the contribution the Internet makes to the overall economy.

“What is interesting here is that the largest contributor to this total is not, as most people would assume, the investment by service providers in infrastructure,” says World Wide Worx MD Arthur Goldstuck.

“While the mobile networks and fibre providers have certainly spent their fair share on infrastructure – a total of R13.5 billion – this pales beside the R29.2 billion spent on Internet presence and access.”

According to Goldstuck, e-commerce is growing at a rate of about 30% a year, and the scope for future growth is much greater. In terms of online advertising, the report estimates the online advertising market currently stands at R1.52 billion. “It will be some years yet before online advertising really grows the Internet economy,” says Goldstuck, adding there is a 30%-40% growth rate in that space locally.

Host of opportunities

Google SA country manager Luke McKend says: “No business, industry or government can ignore the scale of the Internet and the impact it is having. It presents a host of opportunities. SMEs have been uneven in their uptake, but they are moving online in increasing numbers and are committed to doing so.”

Drawing on the findings of the World Wide Worx SME Survey 2012, it was found that 410 000 SMEs (or 63% of active, formal SMEs) in SA have a Web site. “By the same account, that leaves 37% of SMEs in SA without any formal presence online. This figure is very high, considering the impact having a Web site can have on a business,” says Goldstuck.

According to the survey, one in five SMEs (or 150 000 SMEs) said their businesses would not be able to survive without a Web site.

“With SMEs accounting for about 7.8 million jobs in SA, this means as many as 1.56 million jobs would be in jeopardy were it not for the Internet,” notes Goldstuck, adding that having a Web site is considered essential support structure to keep those jobs.

Goldstuck says 42% of SMEs said having a Web site was “somewhat” or “very important” for the growth of the business. Similarly, 40% said an online presence was key to winning and maintaining market share.

“This 40% figure kept recurring. This means that even if an SME doesn't depend on the Internet for its existence, many depend on it for growth,” says Goldstuck.

Golden era

According to Goldstuck, SA is entering what he terms “the golden era” in which the build out of Internet infrastructure will reach a peak in the next few years.

The number of Internet users in SA is also expected to rapidly increase, stimulated in part by the smartphone explosion. World Wide Worx estimates true individual mobile penetration to be at about 80%, with 40 million South Africans using phones.

“These users represent the future potential of Internet growth in SA. Around 10 million phones are sold in SA every year, and it is expected that by 2013, smartphones will account for half of this number,” says Goldstuck. “Since smartphone users eventually become Internet users, we can expect the Internet user base to grow at an accelerated pace.”

Goldstuck adds, however, that due to the digital participation curve, it could take up to five years before new Internet users gain the confidence and experience to become truly active participants in the Internet economy.

“Consequently, the number of Internet users has accelerated from 2008, and the number of experienced users will begin accelerating in 2013, and will continue to do so for the following five years.”

As a result, the South African Internet economy is expected to grow to 2.5% (or R79 billion) of the GDP by 2016. “Looked at in another way, it is likely that over the next five years, the Internet economy will begin approaching the size of the construction sector – an estimated R120 billion in 2011, suggesting this is potentially one of the new building blocks of the South African economy,” says Goldstuck.

Loosening logjams

Research conducted by the Boston Consulting Group, across the G20 countries, showed SA's Internet economy, as a proportion of GDP, ranks very low when compared to both industrialised and developing countries.

In the G20, the average contribution of the Internet economy to the GDP was 4.1% in 2010, expected to grow to 5.3% by 2016. This compares to SA's 1.9% in 2010, 2% in 2011, and an expected 2.5% by 2016.

“The key message for SA, in terms of growing the Internet economy, is to loosen the logjams constraining this economy, to promote ubiquitous and affordable access, and to take a more active embrace of open competition,” says the Internet Economic Impact report.

“This will, in turn, ensure that the economic benefits of the Internet are enjoyed sooner rather than later, and by the many rather than the few.”

The full Internet Economic Impact Study can be downloaded here.


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