News - SA’s IT spend to outpace GDP growth

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SA’s IT spend to outpace GDP growth

Source By Simnikiwe Mzekandaba
1 year ago

E xpenditure on software, particularly cloud services, continues to dominate South African CIOs’ spending priorities, revealed International Data Corporation’s (IDC’s) Jon Tullett. The associate research director at IDC was speaking yesterday at the in-person edition of the IDC Directions 2023 for Sub-Saharan Africa (SSA), in Johannesburg, providing a snapshot of growth expectations from 2022 to 2023, as well as the impact of socio-economic issues on tech in the region. The market research firm’sevent explored the theme: “Navigating disruption in the age of digital business”. When it comes to spending money, Tullett revealed local CIOs are doing so, for the most part. “A lot of it [spend] is in software and most of that is in cloud. We do see that ongoing, despite the fact that a lot of CIOs are under pressure to rationalise their cloud spend, to look critically at where that investment lies, and whether there’s overspend and redundancies. This is the reality, but spend is still increasing.” Asked about their commitment to deploying cloud infrastructure, 100% of CIOs in the region (for the first time this year) pointed to having a strategic commitment to cloud and hybrid cloud infrastructure, said Tullett. “Across all of META [Middle East, Turkey and Africa], there was only a handful who said no and they were in Turkey – none of them were in Sub-Saharan Africa. “Their business priorities really focus around dealing with disruption. They start with dealing with operational issues, making sure the business-as-a-platform is as stable as possible, and able to support digital transformation and responses without that massive operational impact witnessed in the early part of COVID.” While CIOs can’t predict what the next disruption will be, they want to make sure they have much more resilient operational infrastructure, he stated. During his presentation, Tullett was candid about the country’s state of affairs in relation to gross domestic product (GDP), saying when viewed in relation to the rest of SSA, SA is “specifically underperforming” in terms of GDP recovery. After a boisterous third quarter (Q3) in 2022, South Africa’sGDP slowed late in the year, declining by 1.3% in Q4 of 2022. This dip saw National Treasury adjust growth estimates, projecting real GDP growth to average at 1.4% from 2023 to 2025. Conversely, First National Bank’s growth forecast for 2023 is 0.4%, down from 2% actual for 2022. The International Monetary Fund’s projections are much worse, expecting real GDP growth for the local economy to grow at 0.1% this year. “GDP growth is slightly negative, with the best-case scenario being that it will hold flat this year,” Tullett told the audience. “However, the rest of Sub-Saharan Africa seems to be more in the 3% to 3.3% on average.” This hasn’t crushed business optimism, as Tullett pointed out South African business is relatively “upbeat.” “Business confidence isn’t super-high, but after COVID, when it spiked down, it rebounded and is holding its own.” Most surveyed CIOs in SA stated their IT budgets are at least “holding steady or increasing”, and growing quite significantly in many cases. “Right across Sub-Saharan Africa, we see a similar picture. The numbers may be slightly less optimistic elsewhere in Africa, but the picture is similar; for the most part, the money is still on the table. “In terms of contribution to the economy, IT spend is holding its own. The forecast expectation is that IT spend will be significantly above GDP – that’s true in this country [South Africa] too.”

Priorities switch

For the first time, security is not the top priority for South African CIOs, he revealed, being replaced by digital transformation (DX), with 59% prioritising it over security (58%). “In this more complex hybrid environment that we find ourselves in, applying security across that is consistently important.” While DX and security are at the top, governance, risk and compliance is at the bottom at 29%. “There are risk people who deal with it; it’s not something that CIOs tend to deal with. Many organisations do not have that tightly-coupled view of security and risk together. That is changing over time, but it hasn’t yet translated through.” In terms of sustainability, South African CIOs prioritise it slightly higher compared to those in META. “Sustainability is quite significantly higher for us − 12% higher. “We [SA] are lower in IT operations (ops). IT ops are a greater focus in META, specifically in emerging technology areas; namely automation, intelligence and AI. These are areas where South Africa is not keeping up, but it’s growing and there is a lot of interest in them.” He concluded that the level of digital maturity in SA is surprisingly high. “I say this without wanting to sound condescending about South Africa. SA has caught up quite significantly. “Other parts of Africa are doing well too, so the investment in technologies as a business transformation is happening.”