ICT sector faces flat growth as SA stalls
Telkom’s BCX unit predicts minimal growth in the next few years for SA’s information and communications technology (ICT) market, owing to the country’s stagnant economy.
"I see the next few years, again, being flat in terms of growth, and obviously that’s going to be a challenge," said Jonas Bogoshi, who took over as CEO of BCX in June.
Because the private and public sectors had been deferring spend on ICT, Telkom recently conducted a portfolio review at BCX that resulted in a number of underperforming and noncore assets being earmarked for sale. For the year ended March, BCX’s revenue fell 4.6% to R21.2bn.
BCX provides a range of ICT services including software and infrastructure solutions.
Bogoshi referred to reports last week that the SA economy had been tipped into a technical recession. The economy contracted 0.7% in the second quarter after shrinking 2.6% in the first three months of the year.
The recession would weigh on major target industries for ICT firms, such as retail, financial services and mining.
Bogoshi said the total ICT market had already been growing at a "pedestrian" rate of about 1%-2% a year. The products segment was declining by between 1%-5%, though the services part of the industry was growing at about 7% annually.
He also said the expected rebound in public sector work had not materialised.
"Last year, most of the ICT players saw a decline in the public sector, and we are one of those. We thought this year it would come back and we’d see some growth, but looking at the first six months of this year, it’s still a challenge."
However, Bogoshi said the weak economy was driving companies, particularly those in financial services, to adopt cloud computing services.
"The reason they’re doing that is there are cost-savings when you move into the cloud – it’s more efficient and you can pay per consumption so you don’t overcapitalise.
"Most of the banks are talking to us about that," he said.
Banks, manufacturers and retailers were also looking to automate some processes to save costs, and were trying out data analytics "to target their clients better and to offer personalised services".
Bogoshi was speaking at the ITU Telecom World conference in Durban, where Cell C’s chief legal officer, Graham Mackinnon, said that consolidation was very likely in the telecommunications market.
"My prediction is that there will be far fewer telcos in five years’ time. I think consolidation is inevitable, whether that’s driven by infrastructure sharing or not," Mackinnon said.
While telcos would still exist in a few years’ time, they would compete on services rather than on infrastructure and spectrum assets, he said.
It was possible that one or two networks would house the industry’s infrastructure while all would compete on services.