Intelligent CIO Africa Issue 02 | Page 16

COMMENT

Mega ICT spending in Africa linked to revamp of economies

While Africa may have fastest urbanisation rate , macro-economic fundamentals are holding back next surge of ICT mega investment .
Economic and political developments have an important influence on ICT investment and spending trends throughout Europe , Africa and Middle East . This directly affect vendors and users alike . Their impact often varies depending on the maturity of a country ’ s economy and the sophistication of ICT infrastructure .
ICT demand , particularly in the larger European country markets , tends to weather economic storms much better than the more fluid emerging economies . As a consequence , ICT vendors are increasingly doubling down on larger , more developed country markets , focusing on generating more net revenues and income , even with generally lower growth rates , and prioritising investment in sales channels , marketing , and support , accordingly .
With the general demise of emerging markets over the past several years , due to increased economic and political uncertainty and lower demand , ICT vendors have been gradually retrenching in these regions . They have been reducing the number of offices and staff , simplifying management structures , prioritising a smaller number of countries , and cutting back on sales and marketing investment , even to the point of scaling back data requirements .
In reality , the hype around investing in emerging markets as part of a longer-term growth strategy is over for the moment . These trends have been detrimental to the ICT business in that the once very strong growth rates
Steven Frantzen is Senior Vice President EMEA Region and Managing Director CEMA Region at IDC .
characteristic of these regions have slowed substantially .
Of the many regions , Africa holds the greatest longer-term promise , based on population and economic growth trends . According to various reports on worldwide population trends , by 2050 Africa ’ s population will more than double and will account for 1 in 5 people in the world ; Nigeria will surpass the United States in terms of population size , and Africa will be home to 7 of the largest 20 countries in the world .
Population , however is not always a measure of economic destiny . While we can expect that demographics will drive long-term economic growth and go a long way in shaping ICT investment and trends in Africa , the reality of the region ’ s ICT market for the foreseeable future is a combination of lower per capita ICT outlays , lower ratios of ICT spending to GDP , and an enduring gap in technology usage and deployment in comparison to most other regions .
This has to do with the dual structure of the African ICT market , which consists largely of consumer-type spending on large volumes of lower-end ICT equipment for example mobile devices , handsets , along with pockets of more dynamic infrastructure investment in key sectors such as telecommunications and banking .
Of course , the African ICT market will grow , and quite strongly in line with collective consumption , but higher more sustainable ICT market development will only be possible with more balanced economic development across many sectors , greater capital investment in large-scale infrastructure projects , and a more stable business environment .
Various challenges related to transparency , regulation , available capital , stable power and energy , and significant fluctuations in exchange rates , for example in South Africa and Nigeria , continue to plague the region ’ s business landscape and undermine its potential , including that for ICT investment . The flip side is that Africa is now home to some really interesting and unique ICT-based innovation , arising from these local challenges .
For ICT vendors , this means that Africa remains important , but it has begun to lose some of its attractiveness — the region is still a longer term play . In fact , while there was a wave of high-profile investments up until 2015 by some of the larger ICT vendors , many are now scaling back their operations and reducing the number of offices and staff in the region , while refocusing resources on select opportunities and vertical markets .
This said , some of the more far-sighted companies , including Google and telecom operators like MTN , are still placing bets on Africa ’ s longer-term potential .
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