ZIVAI MUKOROMBINDO: SA tech firms could benefit from the Middle East’s AI drive
Companies could invest in early-stage entities and work with them to scale their businesses
SA technology companies stand to benefit from the predicted growth of artificial intelligence (AI), particularly in the Arabian Gulf. The global AI market was valued at $207bn in 2023 and is forecast to grow at a compound annual growth rate of 36% in 2024-30 to $1.8-trillion. Machine learning is expected to grow the quickest, expanding at a compound 35%, followed by natural language processing at 25%, computer vision and robotics at 20%, and autonomous and sensor technologies at 12%.
Driving growth is the surge in AI-enabling web applications that collect and collate data that allows AI models to learn, analyse and predict patterns more effectively. North America and Asia Pacific are expected to lead the AI race, but it is the Middle East’s commitments to AI that makes it a viable investment destination for SA. According to a PWC report on AI, its value in the Middle East could reach $320bn by 2030. AI will account for 12% ($135.2bn) of Saudi Arabia’s GDP and 14% ($96bn) of the GDP of the United Arab Emirates (UAE).
The Arabian Gulf is turning to AI as oil revenues decline. The UAE’s national strategy for AI aims to make the country an AI leader by 2031, with plans for 25% of Dubai’s transport to be driverless by 2030. Saudi Arabia also launched its national strategy for data and AI in 2020, aiming to attract $20bn in investment and empower its citizens with AI and data skills by 2030 as it strives to become a knowledge-based economy. The AI initiatives are already bearing fruit, with Saudi Aramco reporting a 50% reduction in flaring since it started using AI to monitor hydrocarbon gas release.
Because of the availability of AI-competent human capital in SA, local technology enterprises are well positioned to capitalise on the Middle Eastern AI market prospects. In 2023 it was estimated that SA had 1.62-million competent AI tool users. That number is expected to rise to 5.24-million by 2030 due to education and awareness and the transformation of sectors such as healthcare, financial services and education.
As AI becomes more integrated into existing technology, professionals in these areas will need to reskill to be competent in AI tools. SA technology companies are starting to expand offshore; Aerobotics, a drone imagery and mobile application start-up in agriculture started in Cape Town in 2014, expanded into the US in 2018 and now serves customers across 18 countries.
Clevva, an AI web-based platform developer founded in Cape Town in 2011, partnered with UK-based robotic process automation (RPA) firm Blue Prism in 2021 to produce an end-to-end customer service offering by combining the two companies’ back-end and front-end capabilities. In addition, in a bid to strengthen its cloud-based offering, JSE-listed Datatec announced its acquisition of Rebura, a UK-based cloud specialist company in January 2024.
In the light of the above, the UAE could be an attractive destination for SA technology companies seeking to minimise their tax liabilities. In June last year the UAE introduced a new federal corporate tax system setting the corporate income tax rate at 9%, significantly lower than the global average of 23%. In anticipation of the new tax system and policy developments in AI, 40 international technology companies established offices in Dubai and company registrations increased 20% when compared to the preceding year, according to the Dubai International Financial Centre.
The centre plans to draw 500 technology companies to the city by 2028 by launching the Dubai AI & Web 3.0 Campus and attracting investment of at least $300m. In addition, the UAE has worked on easing immigration for people with specialised talents, investors and entrepreneurs, by introducing a “golden visa”, which will make it easier for SA technology entrepreneurs to operate in the emirates. Entrepreneurs who set up projects valued at $550,000 or more will be eligible for the five- to 10-year visa.
Though they are likely to face challenges that include exchange rate fluctuation and finding a suitable and reliable local partner, SA technology companies should explore expanding into the Middle East. As AI start-ups start to increase in the gulf SA companies could invest in early-stage entities and work with them to scale their businesses.
Another option is for SA companies to forge partnerships and alliances with local companies in the Middle East. With the growth of AI tool users there is an opportunity for SA technology businesses to offer engineers and programmers (working remotely or on-site) at more affordable rates than the more developed countries and India.
• Mukorombindo is an associate at strategic research and advisory consultancy Birguid.
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