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Weak economy hammers SA IT market

Johannesburg - Power shortages, a weakening rand, bureaucracy and labour disputes are holding back South Africa’s information technology market, according to researchers.

Research firm Gartner says overall spending on information technology (IT) in South Africa has decreased 4.3% from 2014 to $25.3bn in 2015.

Analysts say the country’s struggling economy introduces constraints on IT market growth.

"Chief among these are shortfalls in electric power supply, uncertainty and delays regarding large mergers and acquisitions, deterioration of the local currency against the dollar and euro, and ongoing labour disputes in key market sectors," said Will Hahn, principal research analyst at Gartner.

"These and other contributing factors have led to low business confidence and increased concern that other locations in Sub-Saharan Africa — chiefly Nigeria or Kenya — could someday overtake South Africa as the chief ‘hub’ market for regional investment," said Hahn.

As of September 2015, Gartner said data centre system spending in South Africa decreased 3.2% from 2014 to touch $635m, enterprise software growth fell 1% to $1.86bn, IT services fell 5% to $6.31bn and communication services decreased 9.1% to $10.94bn.

Only the devices segment grew 6.7% in 2015 to $5.56bn.

Compounding matters is constraints on the local telecommunications sector as providers such as Vodacom have faced decreased interconnection rates in 2014 and 2015.

Growth in 2016

However, the overall IT market is expected to grow 5% in 2016 to reach $26.62bn.

Breaking down this 2016 rebound, Gartner said device spending is expected to reach $6.29bn (13.1% growth), data centre systems $666m (4.9%), enterprise software $2.04bn (9.3%), IT services $6.54bn (3.7%) and communications services $11.07bn (1.2%).

Gartner said South Africa is still more mature than other African IT markets but that it risks falling behind Nigeria and Kenya.

In addition, Gartner said South Africa has a smaller IT market than Brazil, Russia, India and China but that SA spend per capita is still higher than these BRIC markets.

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