Govt's ICT budget is burgeoning

By Leon Engelbrecht, ITWeb senior writer

Johannesburg, 30 Jun 2008

Provincial and local governments are allocating increasing substantial budgets to ICT. However, analysts doubt they have the capacity to spend the bounty.

A new report by BMI-TechKnowledge says provincial and local government spent over R5.6 billion on ICT last year, and will spend R6.4 billion by 2011 - and that excludes local government capital expenditure (capex).

IDC senior analyst Pieter Kok adds that all three tiers of government have ageing infrastructure that needs "refresh", as well as greater integration and consolidation.

SA's total estimated ICT expenditure is now R60 billion a year, meaning the provinces and municipality spend about R1 out of every R10 spent on ICT in the country. National government spends billions more.

"The total ICT spend of provincial government is expected to increase from R3.4 billion in 2007 to R3.9 billion in 2010/11 at a compound annual growth rate of 4.3%," says BMI-T analyst Lesley-Anne dos Santos. "Local government ICT expenditure is also set to increase, from R2.2 billion in 2007/08 to R2.5 billion in 2010/11."

Dos Santos says telecoms capex spending by local government would add significantly to the numbers, "especially if various municipal broadband networks succeed in getting off the ground".

"These projects are looking increasingly uncertain, and hence a scenario-based approach needs to be taken when forecasting expenditure on them," she says.

Major challenges

The BMI-T study says major issues faced by many local municipalities include poor administration, the misappropriation of funds and the retention of skilled staff. Poor financial records and insufficient internal controls compound these issues.

According to BMI-T, provincial governments are dealing with similar issues; however, their financial records are more satisfactory than local government.

"Provincial and local governments are still extremely decentralised," says Dos Santos, "but what may appear to be isolated trends should not be overlooked; as can be seen with the current roll-out of open source software solutions, the potential for government-wide adoption remains and it is therefore essential for vendors to formulate strategies that encompass activities across all levels of government."

World Wide Worx analyst Steven Ambrose adds that ICT spend "in isolation of the whole enabling environment is wasted money".

He says the whole issue of e-governance - a major tri-tier government priority - "is so dependant on the enabling telecoms environment, and the co-ordination of the various elements and structures, that any money spent in isolation at local or provincial level, will in all likelihood not be effective."

He further notes that "the entire issue of decentralisation militates against any e-government strategy, and will result in greater delays and lower service delivery, as the various departments do their own thing. The net result will be a complete waste of resources and lower service delivery and greater frustration."

The IDC's Kok agrees that the main question remains "whether the money will actually get spent, or if long and complicated procurement processes will delay investment".

"Based on the pattern of previous years, IDC believes that each year at least a portion of allocated funds will not get spent."

IT vendors, he says, will need good internal systems to respond to tenders, and good networks and relationships with officials to track the progress of individual purchasing initiatives.