In May 2007 the Financial Mail estimated that the South African ICT industry was worth R60 billion, with the Western Cape accounting for some 15% of this market, or R9 billion. Consisting of approximately 3 000 companies, most of which fall into the micro or small segments of the market; nevertheless, it is an industry that is expected to grow by between 15% and 20% over the next five years.
Formed in 1998 in order to promote the interests of the Western Cape ICT sector, the Cape IT Initiative (CITI) is a networking and cluster development agency with the specific goal of promoting Cape Town as a global ICT hub, in light of its role as a gateway into Africa.
Earlier this year, CITI undertook the 2007 Cape ICT Census, with the aim of assisting the organisation in its role of promoting the Western Cape ICT industry and was particularly intended to build upon the findings of the first Cape ICT Census, conducted in 2003.
"Data and insight gathered from the census will form the basis for investment and export promotion strategies for the region's ICT industry, as well as contributing to our marketing of the province," says CITI's executive director, Viola Manuel.
"The census is designed to supply CITI, government, academia and the private sector with comprehensive data on the current state of the region's ICT market, as well as highlighting the challenges it faces, and taking into account the industry's suggestions on how to address these."
Important industry drivers
One particularly important driver for the region's ICT industry that was noted by the census is the rise in the number of clients requiring specialised skills.
The good news is that this increased demand will prompt the development of more niche areas in the industry and should further drive innovation. The segments that have been described as having the most promising growth potential are those of hardware and software consulting; mobile (particularly mobile applications); multimedia applications; and online tourism products and services.
Export potential is critical for the industry to continue its growth, and the online digital media and software development sectors have the highest levels of exports, which are driven by factors that include an increased use of the Internet globally, industry players being driven to seek opportunities abroad due to limited local markets, and an increased international demand for specialised skills located in the Western Cape.
This in turn has been indicated by the development of outsourcing and offshoring Relationships, with many foreign clients choosing the Western Cape as an outsourcing destination due to its culture, a shared business ethos and the innovative approach to solution delivery, as well as its cost effectiveness, which sees high quality skills made available at a lower cost to other outsource destinations.
Manuel points out that the census shows that while foreign investment levels vary significantly, a number of local companies have engaged in innovative methods of sourcing investment - including the use of Blogs and Google advertisements - which have proved to be successful, mainly due to the greater utilisation and availability of the Internet in these markets.
CITI is proud to note that the customer groups that are the most significant to the Western Cape ICT industry include the South African government and a number of foreign counterparts (notably the governments of Namibia, Botswana, Mozambique, Malawi and Zambia), as well as the key sectors of retail, financial services and the oil and gas industry.
The census noted that a significant number of projects undertaken on behalf of African governments are actually funded by international development agencies promoting economic development strategies.
Nonetheless, the demand from these governments is expected to grow as more African countries strive to meet their Millennium Development Goals, including an increased use and presence of ICT to improve the lives of their citizens, and as they increase their online presence, so the demand for the services of the online digital media sector is also expected to increase.
The skills issue
The census did indicate that lack of skills could become a problem, with the industry highlighting a shortage of quality skills - especially those required by niche areas - as a key area of concern, particularly considering the exacerbating factor of the Western Cape's relatively small skills pool to begin with.
According to Dr Raven Naidoo, who sits on the board at CITI, lack of skills is definitely an area of concern, although he believes that it is not one that is restricted to the Western Cape.
"The matter of skills development is a nation-wide problem, and we actually have quite a number of universities and technical schools, with strong levels of education, in this province, so we are actually ahead of the curve in this respect," he says.
"Nonetheless, there is a limited number of skilled people available, and we are combating this problem at the grass roots level, which is why we have launched a 'Youth in ICT' programme that encourages children early on to study subjects like maths and science, while encouraging them to look at potential careers in ICT."
Manuel says that ultimately, data and insight gathered from the census allows the industry to better understand the challenges it faces, as well as the benefits it can leverage.
"The census will also contribute to CITI's marketing of the Western Cape and enhance our 'Think Global' strategy by providing Western Cape-based companies examples of successful global trading by their peers," she says.
"Overall, the project will facilitate the formulation of cohesive and well targeted industry promotion strategies that will be of real value to all industry participants, and it is important to use this information to properly understand the sector, because it will enable us to focus on our strengths and fully understand the potential of the niche sub sectors, while helping to formulate CITI's strategy going forward."
"With the growing demand for ADSL, further investment in infrastructure, increased competition and a growing rate of adoption of technology, as well as growth in key verticals like oil and gas, as well as the growth of ICT as a business enabler in general, there is no doubt that the Western Cape ICT sector is a melting pot of ideas, innovations and skills and has the potential to compete as a world class IT hub," she concludes.
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