IT spending in South Africa is forecast to total R266 billion in 2017, a 2.4% increase from 2016, according to Gartner, Inc. Software is predicted to be the best-performing segment, with a 13.2% increase year-on-year (see Table 1).
“South Africa has traditionally underinvested in IT,” said John-David Lovelock, Vice President and Distinguished Analyst at Gartner. “South African organisations continue to prioritise investments in software, as software spending is the means by which they will catch up with the rest of the world.”
Spending on devices (PCs, tablets, ultramobiles and mobile phones) in South Africa is forecast to decline by 4.6% in 2017. Purchases of devices by businesses and consumers are slowing in the face of rising prices and in the expectation of new products. “However, 2018 is set to be a rebound year,” said Lovelock. “The introduction of premium smartphones will increase device spending by 3.8% in that year.”
Spending on communications services, the largest segment in South Africa, reached R122 billion in 2017, a 0.8% rise. “Price competition between regional carriers, along with extremely price-sensitive consumers, is preventing substantial growth in spending in this segment, despite an overall increase in mobile device ownership,” said
Currency fluctuations against the US dollar can have a deleterious effect on IT spending in South Africa. The cost of most IT products is based in dollars, which means that local prices in Rand must increase enough to cover costs and margins in dollars. The higher the dollar cost of a product or service, the more volatile the local price is to currency movements. “Despite a dip against the dollar in the last few weeks, the rand strength against the dollar has been up in 2016 and this will help curb the recent price increases seen on servers, storage and devices,” said Lovelock. “South African organisations should learn from their European counterparts. They should embed currency risk into all IT contracts, ensure long-term contracts are priced in rand and seek local delivery, where possible.”
Gartner’s IT spending forecast methodology relies heavily on rigorous analysis of sales by thousands of vendors across the entire range of IT products and services. Gartner uses primary research techniques, complemented by secondary research sources, to build a comprehensive database of market size data on which to base its forecasts.
Additional analysis on IT trends and investments will be provided during Gartner Symposium/ITxpo 2017, 18-21 September in Cape Town, South Africa, the world’s most important gathering of CIOs and other senior IT executives. Follow news and updates from the events on Twitter using #GartnerSYM.