The Technology, Media & Telecommunications sector in South Africa

The telecoms sector in South Africa is one of the most mature on the continent – the voice market is saturated and mobile broadband is not far behind[i] – 17% of South African have a smartphone.  As a result, subscriber growth is slower than elsewhere in Africa but net revenue potential is high, what with higher incomes, a large and increasing population and continued economic growth.[ii]

Recent liberalisation has revolutionised the tech arena, leading to lower prices and a surge of new entrants into the market.  Teraco is the biggest provider of carrier neutral data centres in Africa, with data centres in Cape Town, Durban and Johannesburg.[iii] Submarine cables are no longer subject to a monopoly and this has boosted industry no end. Current regulatory hurdles include WiMAX and LTE spectrum licensing and the unbundling of the local loop,[iv] but overall the outlook is bright.

Digital social media are advanced enough to support an online advertising and marketing sector. South Africa is leading in Africa in online shopping, banking, social media and cloud computing.[v] MVNOs are a growing proposition, and there’s scope for regional platforms to spread across borders. A recent Deloitte study predicts a second wave of “more mature mobile banking services: mobile-only banks, micro-finance, insurance. Banking could take a new shape with mobile-only banks such as TYME in South Africa (MTN, SABA, retailers Pic’n’Pay and Boxer).”[vi]

A diverse range of businesses are thriving in this space. In terms of business services, you have companies like Panda Security, which offers a collection of free antivirus tools on a “freemium” basis.[vii] FaxFX provides a free fax to email service subsidised by corporate fax customers[viii] and Everlytic produces cloud marketing software that manages campaigns across email, mobile and social media.[ix] The company has experienced an astonishing 606% growth rate since 2010.[x] Another fast grower, Adapt IT provides technology services to other businesses and has grown by 295% in the last five years.[xi] And then there’s Afrihost, an ISP providing broadband, web hosting mobile data, domain registration, and the like.[xii]

In banking, a subsidiary of the Bank of Athens,[xiii] since 2004, WIZZIT has offered South Africans a low-cost, transactional bank account that uses any mobile on any network for making and receiving payments, together with a MasterCard debit card.[xiv] Likewise, FNB’s eWallet allows anyone to send money to anyone with a South African mobile number; the money is transferred instantly and can be used to withdraw cash from FNB ATMs, buy prepaid airtime or electricity.[xv]

In the education sector, Spark Schools are an affordable private school network in South Africa which operation on a “blended-learning model”, where students spend a quarter of each day learning online or with educational software. This keeps costs down and ensures children gain a good understanding of technology and are more independent in their learning. Spark Schools plans to open 64 schools over the next 10 years, educating 64,000 students. Eventually they hope to bring their unique learning model into established and new schools in South Africa and the rest of the continent.[xvi]

But it’s not all plain sailing.  Homegrown social network Mxit, launched in 2005 by Herman Heunis, rocketed in popularity to become the top social network in South Africa, with (it claimed) 50 million registered users worldwide – including 17 million in South Africa.  These figures are not entirely believable, but even on Mxit’s own figures by 2014 they were down to 4.9 million users.  They have, unsurprisingly, not released numbers since then.[xvii]

Mxit appears to have failed to evolve; it was based on pre-smartphone mobile platforms and was abandoned as its core users switched to newer models.[xviii] That said, as recently as November 2014 it reportedly still has very highly engaged users in South Africa – the average user signs in five times a day, and spends 105 minutes a day online.[xix]

Is the success of the tech sector in South Africa a consequence of exaggerated wishful thinking though?  It has been argued that behind the hype are actually surprisingly few key players or thought leaders, a reliance on grants and NGO funding rather than proper, genuine investment in start-ups and a bureaucratic culture that strangles entrepreneurship at birth.[xx] Lack of security, democracy and the rule of law undoubtedly hinder true prosperity and South Africa’s brain drain has not helped.

South Africa’s schools have not truly recovered from apartheid era inequalities and deficiencies.  Witwatersrand University recently published the results of its sixth consecutive skills trend survey on South Africa’s ICT sector. The report’s author, Adrian Schofield believes South Africa is running the risk of lagging behind countries like Kenya, Nigeria and Egypt, which are much more focused on harnessing technology to grow their economies. Conversely, South Africa suffers a shortfall in graduates in science, technology, engineering, and mathematics disciplines and a long list of failed government technology projects. South Africa’s enormous pool of unemployed young people needs to be nurtured and given the opportunities to explore their own talent.[xxi]

[i] South Africa – Key Statistics, Telecom Market and Regulatory Overviews, Budde Reports, 4 May 2015, http://www.budde.com.au/Research/South-Africa-Key-Statistics-Telecom-Market-and-Regulatory-Overviews.html

[ii] The future of Telecoms in Africa: The “blueprint for the brave”, Deloitte, 29 April 2014, http://www2.deloitte.com/content/dam/Deloitte/za/Documents/technology-media-telecommunications/ZA_TheFutureOfTelecomsInAfricaFinal_29042014.pdf

[iii] Permira makes first African investment in data centre firm Teraco, Reuters, 4 December 2014, http://uk.reuters.com/article/2014/12/04/permira-africa-teraco-idUSL6N0TO3R320141204

[iv] South Africa – Key Statistics, Telecom Market and Regulatory Overviews, Budde Reports, 4 May 2015, http://www.budde.com.au/Research/South-Africa-Key-Statistics-Telecom-Market-and-Regulatory-Overviews.html

[v] South Africa – Digital Economy and Media Markets – Insights and Statistics, Budde Reports, 4 May 2015, http://www.budde.com.au/Research/South-Africa-Digital-Economy-and-Media-Markets-Insights-and-Statistics.html

[vi] The future of Telecoms in Africa: The “blueprint for the brave”, Deloitte, 29 April 2014, http://www2.deloitte.com/content/dam/Deloitte/za/Documents/technology-media-telecommunications/ZA_TheFutureOfTelecomsInAfricaFinal_29042014.pdf

[vii] The future of Telecoms in Africa: The “blueprint for the brave”, Deloitte, 29 April 2014, http://www2.deloitte.com/content/dam/Deloitte/za/Documents/technology-media-telecommunications/ZA_TheFutureOfTelecomsInAfricaFinal_29042014.pdf

[viii] The future of Telecoms in Africa: The “blueprint for the brave”, Deloitte, 29 April 2014, http://www2.deloitte.com/content/dam/Deloitte/za/Documents/technology-media-telecommunications/ZA_TheFutureOfTelecomsInAfricaFinal_29042014.pdf

[ix] Everlytic, http://www.everlytic.co.za/

[x] Technology: Fast 50 Africa winners announced, Deloitte, 24 November 2014, http://deloitteblog.co.za/2014/11/24/technology-fast-50-africa-winners-announced/

[xi] Technology: Fast 50 Africa winners announced, Deloitte, 24 November 2014, http://deloitteblog.co.za/2014/11/24/technology-fast-50-africa-winners-announced/

[xii] Afrihost, https://www.afrihost.com/

[xiii] The future of Telecoms in Africa: The “blueprint for the brave”, Deloitte, 29 April 2014, http://www2.deloitte.com/content/dam/Deloitte/za/Documents/technology-media-telecommunications/ZA_TheFutureOfTelecomsInAfricaFinal_29042014.pdf

[xiv] AdvisoryStories from the Field – WIZZIT Micro-lending Pilot (South Africa), IFC, 28 September 2011, http://www.ifc.org/wps/wcm/connect/8e150880487ebb4b855bed51e3a7223f/IFC+Wizzit_MobileMoneyMicro-LendingCaseStudy.pdf?MOD=AJPERES

[xv] eWallet, FNB, 2015, https://www.fnb.co.za/ways-to-bank/ewallet.html

[xvi] Spark Schools, Clayton Christensen Institute, 2013, http://www.christenseninstitute.org/spark-schools/

[xvii] Mxit: the rise and collapse of ‘Africa’s largest social network’, Memeburn, 27 February 2015, http://memeburn.com/2015/02/mxit-the-rise-and-collapse-of-africas-largest-social-network/

[xviii] Mxit: the rise and collapse of ‘Africa’s largest social network’, Memeburn, 27 February 2015, http://memeburn.com/2015/02/mxit-the-rise-and-collapse-of-africas-largest-social-network/

[xix] South African Social Media Landscape 2015, World Wide Worx, November 2014, http://www.worldwideworx.com/wp-content/uploads/2014/11/Exec-Summary-Social-Media-2015.pdf

[xx] 2014 LSE Africa Summit: Africa tech hubs – A tale of hope or hype?, Africa at LSE, 5 March 2014, http://blogs.lse.ac.uk/africaatlse/2014/03/05/2014-lse-africa-summit-africa-tech-hubs-a-tale-of-hope-or-hype/

[xxi] S.Africa’s ICT sector lacks critical skills, CNBC, 12 February 2015

http://www.cnbcafrica.com/news/southern-africa/2014/11/18/south-africa-ict-skills-shortage/

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