Boston, MA -- (ReleaseWire) -- 03/07/2014 -- This quarter we extend our five-growth forecast for South Africa's IT market to 2018. We also revise our growth outlook to reflect key macroeconomic and industry-specific factors affecting the sector, including relatively weak GDP growth in 2014 and 2015, continued currency depreciation and changing demand patterns for IT products and services.
We expect the IT services sector to record the strongest growth over our forecast period to 2018, followed by the IT software sector, which is benefitting from the take-up of cloud-based solutions. Falling demand for PCs and laptops, in favour of more mobile form factors such as tablets, has dampened our outlook for the computer hardware market in the consumer segment, although we expect continued government and enterprise patronage to sustain growth, albeit it minimal.
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Headline Expenditure Projections
- Computer hardware sales: ZAR36.30bn in 2013 to ZAR38.34bn in 2014, up 5.6% in local currency terms. Declining demand for PCs and laptops and weak local currency will affect growth in 2014.
- Software sales: ZAR22.63bn in 2013 to ZAR23.21bn in 2014, up 7% in local currency terms. We believe the uptake of cloud-based software, which is less susceptible to piracy, will drive growth in software sales.
- IT services sales: ZAR35.36bn in 2013 to ZAR39.35bn in 2014, up 8.4% in local currency terms. We expect cloud computing and business process outsourcing (BPO) services to drive the uptake of managed services and outsourcing.
South Africa is in sixth position in our Q214 Middle East and Africa IT Risk/Reward Ratings table. South Africa's aggregate score of 56.6 out of 100 is unchanged from our last update and is slightly higher than the regional average score of 54.2.
Key Trends And Developments
Market consolidation has continued in South Africa's IT sector, in line with a view we have expressed in previous reports. This is driven by the need to acquire new competencies and complementary skills, as well as gain scale and improve cost efficiencies. There were two notable developments in this regard since our last update. In December 2013 Mustek announced plans to buy a 26% indirect equity interest in Sizwe Africa IT Group. The deal is expected to boost Mustek's network solutions, infrastructure solutions and the service delivery model. In January 2014 T-Systems announced its acquisition of Intervate, a specialist provider of enterprise information management (EIM) solutions. The deal would enable T-Systems to deliver innovative new solutions to business customers, including SharePoint and mobile applications. In addition, Intervate is a Microsoft-focused business and will help T-Systems grow its partnership with the vendor.
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