The African ICT industry has been ”quite sheltered” from the global economic downturn, consultancy Frost & Sullivan said on Tuesday.
African information and communication technology (ICT) industries had remained ”fairly robust” and should witness continued growth, the consultancy said.
Like Latin America, Africa offered investors opportunities that counteract the negative global climate.
”Firstly, Africa’s status as an emerging market destination is expected to stand it in good stead as investors aim for growth markets in these turbulent times,” Frost & Sullivan ICT industry analyst Lindsey McDonald said.
In addition, Africa was a low cost centre, and it therefore made sense for international companies to consider relocating certain business processes and facilities to this market, McDonald said.
These relocations could include manufacturing, customer support and human resource matters.
”This is a key driver for governments within Africa and Latin America promoting their business process outsourcing (BPO) industries,” McDonald said.
Players from around the world had turned to Africa as a destination for investment — perhaps the best example of this was in the telecommunications sector, where international giants were ”scrapping for a piece of the very lucrative pie”.
As a result, lower priced, more advanced solutions had reached the continent, and technology vendors had benefited from the opportunities in an untapped market, McDonald said.
”In the continent’s mobile sector, companies such as Zain, MTN, Orange, Tigo and Vodacom all enjoy healthy operating margins. It would seem that the market for IT services in general is also still healthy if the success of South African players such as GijimaAST, Dimension Data and Business Connexion is any indication.”
However, McDonald said it should be noted that key markets such as financial services, government, mining as well as oil and gas, were expected to remain the major contributors to ICT spend.
The alternative business models presented by the internet were also expected to witness significant growth during this troubled time.
This was due to the internet’s ease of use, the fact that it was 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, McDonald said.
Governments across Africa had also identified ICT as a priority area for investment and economic development.
”This is based on the view of ICT as an enabler for the development of other key industries. Concerted efforts on the part of governments have already resulted in significant strides in terms of job creation and investment.”
Africa would, however, still feel some negative effects from the recession in developed markets, McDonald said.
”As it becomes more difficult to borrow money, companies will be forced to cut down on their spending.”
The importance of the ICT sector was, however, such that companies and governments had to find a way to sustain development expenditure as far as possible, as this was essential to economic growth.
”The African ICT industry might see some slowdown in the levels of capital expenditure growth, but this is expected to have only a slight impact on the success of the sector.”
Investors would still be guaranteed return on investment, although this could be over a longer period, McDonald said.
”Frost & Sullivan believes Africa’s growth potential is the continent’s main value proposition, and is something that not many other global markets can currently match.” – Sapa