International ICT companies will have a more targeted and thought-out approach to developing their businesses in Africa, as opposed to the opportunistic approach of the past, says Frost & Sullivan analyst Lindsey Mc Donald.
She says that, until recently, ICT companies would enter the African market generally only when following a client, or when a specific opportunity arose.
However, the continent's high growth rates and the potential that still exists means it is counter to the economic depression that has gripped other parts of the world.
Slow, but steady
Frost & Sullivan predicts healthy compound annual growth rates for certain ICT sectors.
The African mobile phone sector is forecast to grow at a rate of 20% in 2009. This is slower than the 25% expected for last year and well off its phenomenal growth rate of 70% in 2005. Revenues are expected to fall as increasingly more subscribers are connected.
“It is a slowing growth rate, but it is still a very healthy one,” McDonald says.
She points out that mobile network operators such as Zain, MTN, Orange, Tigo and Vodacom enjoy healthy operating margins.
Satellite communication connectivity is also forecast to have healthy growth. “Kenya showed a growth rate of 100% last year and yet is still expected to grow at another 30% to 40%.”
IT infrastructure services are forecast to grow at a rate of 10% to 15% in the coming year, and Mc Donald says this will grow as connectivity increases.
She notes it would seem the market for IT services in general is still robust if the success of South African players, such as GijimaAst, Dimension Data and Business Connexion, is any indication.
However, it should be noted that key markets such as financial services, government, mining, as well as oil and gas, are expected to remain the major contributors to ICT spend, she adds.
Realising connectivity
Undersea cables will have an impact on the continent's overall growth rates, but this will be predicated by the terrestrial connectivity, says Mc Donald.
“Only when the landlocked countries are connected will the real impact of the new undersea cables be realised.”
Mc Donald explains that projects, such as Uhurunet, which has undersea and terrestrial networks, are encouraging as it shows African governments are thinking about this, but the key factor will be implementation.
Political risk will be an issue for ICT companies doing business in Africa. However, unlike other industries such as oil and gas, which are all or nothing games, it will largely be the regulatory environment that ICT companies will have to deal with.
“African countries do understand that people have to make telephone calls and, in order to do that, they need to be connected, so while political risk is a reality, it is different to that of other industries,” Mc Donald says.
She expects the business process outsourcing industry to continue to grow, although this may be tempered by the general move in Europe and the US to bring offshore jobs home.
“However, cost benefits will play a major factor in this, and SA and other countries will still benefit by being cheaper than in the developed world.”
Alternative business models presented by the Internet are also expected to witness significant growth, Mc Donald notes. “This is due to the Internet's ease of use, the fact that it is less cost-intensive and its ability to tap into new talent pools, such as cooperation between Indian and South African counterparts in the BPO sector.”
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