R&D lacking in SA ICT industry

The local ICT industry appears to have little or no focus on research and development (R&D) relying mainly on imports, says international credit insurer, Coface, in its quarterly risk review.

George Marais, risk analyst at Coface, believes this remains one of the major reasons why the ICT sector contributes such a small percentage to the country’s GDP. “In addition, the industry is still facing a severe skills shortage; however, employee salaries are increasing at a rate that could soon negatively affect the industry.”

Coface says that IT market revenues are expected to grow at a compound annual growth rate of 7,6% p.a. over the five year period, 2010 to 2015.

The group puts South Africa as the 20th largest consumer of IT products and services in the world. “Storage should out-perform other hardware areas due to continued virtualisation and cloud computing initiatives,” it said.

“The IT education market is of a high standard. This is prompting a growing number of post-graduates to enter the field. South Africa’s well-developed software infrastructure remains an international player and [is] recognised in the fields of security and payroll solutions. This positions SA well as a potential participant in the global market,” Marais said.

Marais further opined that South African companies are world leaders in pre-payment, revenue management and fraud prevention systems and in the manufacture of set-top boxes – all exported successfully to the rest of the world. The industry is characterised by technology leadership in electronic banking services, he said.

Coface stresses that, despite the lack of focus on R&D, the electronics industry is growing at levels well-above the overall GDP growth rate.  “The sector is highly competitive, producing high value-added electronic products, and it’s expected to continue showing strong growth in the future due to key competitive advantages specific to the country and the continent,” Marais said.

In May, a study conducted by World Wide Worx for Google SA found that the total spend by SA consumers, SMEs, and government on products and services via internet in 2011 – as well as on Internet infrastructure – amounted to R59 billion.

It noted further that South Africa’s Internet economy contributes 2% to the country’s GDP, and is forecast to reach 2.5% by 2016.

The Department of Science and Technology says South Africa has maintained a steady growth in R&D expenditure over the past decade,with gross expenditure on research and development (GERD) growing five-fold from R4 billion in 1997/98, to R21 billion in 2008/09.

The ratio of GERD as a percentage of GDP, it said, has also expanded over this period – from 0.69% to 0.92%. ICT GERD, as a percentage of GDP, was at 0.13% in 2008/09.

The Coface Group provides companies around the globe with solutions to protect them against the risk of financial default of their clients, both on the domestic market and for export.

Each quarter, it publishes its assessments of country risk for 157 countries based on its knowledge of companies’ payment behaviour and on the expertise of its 350 underwriters.

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R&D lacking in SA ICT industry