Government to spend R45bn

Johannesburg, 08 Jan 2008

The South African government is expected to spend about R45 billion on ICT in 2008, more than 10% growth from the R35 billion last year, says research firm ForgeAhead.

Senzo Nkabinde, ForgeAhead's acting head of research, says part of the increased spend will be driven by ICT infrastructure spend for the 2010 World Cup Soccer games, which is supposed to be accelerated in 2008 in preparation for the 2009 handover.

It is not yet clear what the final ICT spend will be. However, government officials have previously estimated it at R5 billion.

Nkabinde also notes that government's general ICT expenditure is difficult to pin down, as the public sector does not have ICT as an independent category of spend. Some departments were reluctant to disclose their projected spend before the February budget speech, he says.

Healthy growth

Meanwhile, BMI-TechKnowledge (BMI-T) reports that the South African telecommunications market generated about R115 billion in revenue last year, an 11% increase compared to the R103 billion generated the previous year.

This figure includes interconnection fees, which operators pay to each other, as well as customer-based revenue, says BMI-T senior analyst Tertia Smit.

The finding is part of BMI-T's customer profile and market analysis reports, the Top 350 and Corporate Report and the SME (small and medium enterprise) Report.

The two reports provide detailed spend analyses on telecoms service types, including overall mobile voice spend, including LCR and SMS and data spend.

According to the reports, the total South African business telecommunications services market, including fixed, mobile, Internet and other data, accounted for R99 billion in that period, she says.

The private and informal business sector accounted for 55% of the total market share, while the formal SME segment generated 18% and the corporate market made up 27% of the total revenue, she says.

Under BMI-T's forecast scenario, the overall corporate spend on telecommunications services is expected to grow at an average rate of 6.6% between 2007 and 2012, says Smit. The SME will grow at an average rate of 5.5% over the forecasted period, she says.

Higher growth in data services is the main factor driving corporate growth at a more rapid rate than SMEs, she says.

Early stages

Smit says the telecoms market is still in the early stages of the radical change that will see fixed-mobile convergence and an increasingly higher proportion of telecoms revenue coming from Internet-based voice and data services.

A more established trend is that of fixed-to-mobile substitution, where users unable to access fixed services for a variety of reasons access mobile services, she says.

"Growth overall is attributed to the competitive dynamics within the telecoms market itself, the growth in the SA economy and the resultant increase in the number of both corporate and SME organisations. While prices per unit of service continue to fall in many service areas, overall market growth is maintained, albeit in single digit rates, due to the need for more services, especially in the corporate market."

She notes that data services continue to show higher growth rates in both the fixed and mobile markets, for corporate and SME organisations, while the mature fixed voice market slows down.

Internet access and value added services exhibit the strongest growth rates, she says. This high growth rate is stimulated by the corporates' need for quality of service and higher bandwidth and their need for mobile Internet connections to allow for an increasingly mobile workforce, she says.

The local business environment is made up of almost 600 000 companies that are tax registered, with roughly 77 000 of these companies making up the corporate and mid-market sector, which is defined as organisations with more than 50 employees.

The remaining 506 000 companies fall into the SME sector, which is classified as having between two and 50 employees. Non-VAT registered businesses, informal, and occasional businesses, thought to number between 1.7 million and 2.5 million, were not included in the analysis.