Gartner says South African IT spending will grow 2.4 percent in 2017

Rene Jacobs Gartner

IT spending in South Africa is forecast to total R266 billion in 2017, a 2.4 percent increase from 2016, according to Gartner, Inc. Software is predicted to be the best-performing segment, with a 13.2 percent increase year on year (see Table 1).

“South Africa has traditionally underinvested in IT,” said John-David Lovelock, vice president and distinguished analyst at Gartner. “South African organisations continue to prioritise investments in software, as software spending is the means by which they will catch up with the rest of the world.”

Table 1. IT Spending Forecast, South Africa (Millions of Rand)

  2016 Spending 2016 Growth (%) 2017 Spending 2017 Growth (%) 2018 Spending 2018 Growth (%)
Data Centre Systems 8,097 3.5 8,192 1.2 8,177 -0.19
Software 24,938 11.7 28,219 13.2 31,713 12.4
Devices 38,489 -2.7 36,710 -4.6 38,117 3.8
IT Services 67,228 12.3 70,996 5.6 74,813 5.4
Communications Services 121,115 0.5 112,019 0.8 122,281 0.2
Overall IT 259,867 3.9 266,136 2.4 275,101 3.4

Source: Gartner (July 2017)

Spending on devices (PCs, tablets, ultramobiles and mobile phones) in South Africa is forecast to decline by 4.6 percent in 2017. Purchases of devices by businesses and consumers are slowing in the face of rising prices and in the expectation of new products. “However, 2018 is set to be a rebound year,” said Mr Lovelock. “The introduction of premium smartphones will increase device spending by 3.8 percent in that year.”

Spending on communications services, the largest segment in South Africa, reached R122 billion in 2017, a 0.8 per cent rise. “Price competition between regional carriers, along with extremely price-sensitive consumers, is preventing substantial growth in spending in this segment, despite an overall increase in mobile device ownership,” said Mr Lovelock.

Currency fluctuations against the US dollar can have a deleterious effect on IT spending in South Africa. The cost of most IT products is based in dollars, which means that local prices in rand must increase enough to cover costs and margins in dollars. The higher the dollar cost of a product or service, the more volatile the local price is to currency movements. “Despite a dip against the dollar in the last few weeks, the rand strength against the dollar has been up in 2016 and this will help curb the recent price increases seen on servers, storage and devices,” said Mr Lovelock.

“South African organisations should learn from their European counterparts. They should embed currency risk into all IT contracts, ensure long-term contracts are priced in rand, and seek local delivery, where possible.”

Gartner’s IT spending forecast methodology relies heavily on rigorous analysis of sales by thousands of vendors across the entire range of IT products and services. Gartner uses primary research techniques, complemented by secondary research sources, to build a comprehensive database of market size data on which to base its forecasts.

Gartner’s quarterly IT spending forecasts offer a unique perspective on IT spending across hardware, software, IT services and telecommunications segments. They help Gartner clients understand market opportunities and challenges. The most recent IT spending forecast is available here.

Edited By: Darryl Linington
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