Leading SA's economic future

The global economic crisis has left virtually every financial analyst and journalist with a furrowed brow. There is little to no certainty around what the markets will do next and even the layman is watching the situation closely - hoping interest rates will drop and food prices will stabilise.

There is a general consensus that SA, and other leading emerging markets, will be better insulated in the ongoing financial storm. And while I am no financial guru, I tend to agree, however, for very different reasons than most would expect.

My thought process stems from a conversation I had with an analyst at last year's Gartner technology summit - well before the crisis hammered the world. Research VP and fellow Mark Raskino explained to me why India was well ahead in the outsourcing business, and this discussion has stayed with me.

Essentially, Raskino's argument was that India's government saw the potential of ICT outsourcing and chose to make it the basic driver of the country's economy. Even with the economic trouble, India's outsourcing industry revenue is expected to surge by nearly fivefold, to $50 billion by 2012 - a massive increase in stormy times.

Raskino went on to explain that SA's national government is sitting on the fence in terms of deciding which industry will power the local economy. Months of mulling the idea led me to question his argument; after all, the mines have played a very large role in driving local financial influx.

However, during 2008, the mines took a significant beating. First with the electricity crisis, which plummeted production levels and basically held mine managers at ransom. Later, the crash of the international car companies, like General Motors, again left the mines hanging. At one point last year, the gold price was higher than platinum - a first in my lifetime.

One analyst I spoke to last year expected the mines to take an even bigger beating. His take was that those companies that rely on annuity-based revenue will be better placed to handle the current climate and the mines don't really have that.

However, the telecommunications market does. MTN, Vodacom and Telkom are all looking at higher annuity-based revenue than ever before and most of the businesses in the sector are striving toward that goal.

Even government has seen the value of the telecommunications industry, proved by its desperate attempt to hold onto whatever piece of pie it can.

Candice Jones, telecoms editor, ITWeb

Even government has seen the value of the telecommunications industry, proved by its desperate attempt to hold onto whatever piece of pie it can. Indeed, the South African telecommunications industry is thriving.

In 2006 alone, the combined power of the phones contributed over 7% to SA's gross domestic product (GDP), which grew 4.6%. No report exists on their contribution for 2007 and 2008, however, I suspect the contribution will be significantly higher.

Raskino may argue, but I believe the telecoms companies have made a decision for SA to be the driver of the local economy. Not just that - I believe they will succeed.

The Allied Technologies-Department of Communications battle will have far deeper reach than anyone expects. Not only did Altech gain some frame of liberalisation from government during that case, it also proved that the telcos are no longer under government's thumb.

This case has given the telcos freedom to go forth and reproduce revenue - unfettered. While there will be more than one company that will definitely not make it - or that may well get swallowed by the larger players - this year will be the year telcos lift SA in the global economy.

The Altech judgement is not the only indicator that a renewed success in SA's economy will rest with the telcos.

Consider MTN, Neotel, Infraco and Vodacom all have or will have a local national network of fibre connected to metro rings, creating a mass of local capacity. Couple that with the Seacom undersea cable, which will land this year, and Eassy next year. More international capacity than we could have hoped for four years ago.

This availability of capacity will not only drive competition locally, but will also bring in international business. Companies like Deutsche Telekom, with a local presence in the form of T-Systems, will now have access over networks that will be competitively priced.

The available bandwidth will give these international businesses the access that has been sorely lacking and tightly guarded, and services over these lines will become a norm. All of this will add more to SA's GDP than ever before.

So yes, internationals will send services locally, but SA will also have more opportunity to export telco services over our shiny new networks. The high penetration of telecoms locally has already created an innovation hub that can viably create massive revenue for the local market.

There are a million examples of why these businesses will be economic drivers in the country - too numerous to mention in the short space I have here. Having the telcos at the helm of growth is a good reason to remain positive about SA's future during the global economic crisis.