SA`s much-maligned information and communications technology (ICT) sector emerged from 2002 with not only its reputation intact, but also its bottom line, says a research report.
SA is also fast becoming the ICT gateway to Africa, says a Map of the Information and Telecommunications Technology Sector in South Africa 2003 (MITTS SA), released by World Wide Worx this week.
Arthur Goldstuck, MD of World Wide Worx, says despite the high-profile collapse in the share prices of one-time darlings of the stock exchange, most ICT companies weathered what was as much a storm in market sentiment as in industry activity.
Even the disastrous performance of Dimension Data in 2002 held a positive - the company still made a substantial profit, despite the contrary impression given by the media.
Of 40 ICT and electronics companies that have reported results for 2002, 77% reflected an operating profit. Goldstuck says it is expected that this proportion will be closer to 90% for the current year.
In a market that has seen a global downturn in sales, SA`s top ICT companies have seen a hefty growth in turnover for the past two years. The 40 companies included in the MITTS SA survey reported R67 billion in sales for 2000, a 31% increase to R88 billion in 2001, and a further 21% jump to R107 billion in 2002.
The numbers are not a definitive indicator of growth in ICT, however, as many of the turnover figures reported include the impact of acquisitions and corporate restructuring. Nevertheless, where losses have been reported, they have often been the consequence of the kind of exceptional items excluded from headline earnings.
"These numbers are no secret," Goldstuck says. "But market sentiment around ICT has been so negative since the tech stock crash of 2000, everyone has been focusing on the bad news. The good news is that the mainstream ICT sector is broadly healthy and profitable.
"There is no question that it is not as profitable as a few years earlier, but there is no indication of a sector that is collapsing, despite share prices plunging. In other words, market sentiment has killed off IT shares, but not IT companies. A slowdown in growth does mean that growth continues, although at a slower rate."
One of the report`s findings is that skills are still in short supply and skills development has become a priority.
Another key finding is that SA is becoming the ICT gateway to Africa, with an increasing number of local companies expanding into southern, east and west Africa, and many multinational companies that market in Africa choosing to base their regional offices (typically overseeing the Middle East and Africa) in SA.
Another positive trend is increasing willingness of local ICT companies to tackle developed markets, such as Europe and the US.
Bruce Conradie, who led the research, says: "South African IT players are increasingly eyeing these markets and their sense of self-belief is growing. More and more local companies know they can play on the same field as the best in the world and are going offshore."
Overall, the 265-page report paints a more positive picture for the South African ICT landscape than has been observed for international markets. The 115 company profiles in the report also underline the fact that those companies that continue to make losses or go out of business will represent a weeding out of the weaker performers, and a strengthening of the proverbial gene pool of ICT companies in SA.
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