Public ICT spending increases

Johannesburg, 10 Jul 2009

The slow economy has not decelerated state-owned enterprises (SOEs) from spending on ICT, says ICT market analyst firm, BMI-TechKnowledge (BMI-T).

But Hubert Wentzel, EOH Consulting divisional director, says political challenges and the general wait-and-see attitude are making it increasingly frustrating for local service providers to engage with SOEs.

“In our experience, as much as there is a huge demand on SOEs to spend their budgets to meet their obligations, there also appears to be a lack of ICT ownership and drive.

“Sales cycles are getting longer, payment is taking even longer still, and tender processes are being challenged while other tenders are simply withdrawn. This has translated into service providers approaching tenders from SOEs very cautiously, and in many cases not bidding at all.”

Wentzel points out that tenders are generally awarded to companies that don't have the necessary credentials to implement projects and they end up sub-contracting the work again, leading to margin compression.

“We view the public sector as very strategic and a very important market, but the challenges of dealing with SOEs has forced us, as service providers, to be very selective in our responses to ICT tenders which often results in a bigger focus on the private sector,” he says.

BMI-T profiled 11 SOEs which include, Eskom, Transnet, SAPO, SAA, GSSC, SITA, SABC, SARS, SARB, ACSA and Armscor. According to the research, the 11 spent R6.6 billion on hardware, software, IT services and communications in the 2007/08 financial year. This expenditure is expected to grow at a compound annual growth rate of 11.3% to reach R11.2 billion in 2012/13.

The report states that ICT expenditure is expected to increase as Transnet and Eskom expand and gear up to deliver on SA's infrastructure requirements, and that SOEs are also currently focusing on the massive high-profile projects associated with the Fifa World Cup 2010.

BMI-T identified trends showing that SOEs have started forming partnerships with the private sector to maximise the enterprise and national interest, as well as to address the ICT skills shortage which is still a major concern for government and private companies.