South African ICT Sector Development Framework

APPENDIX B: BACKGROUND INFORMATION

Why the Strategy is Needed

The Information Age is characterised by global competition based on a high level of information infrastructure with no geographic boundaries. One of the key trends of the Information Age is that of globalisation, the ability to access world-wide resources through innovative technological applications. The main challenge for countries outside of the developed world is to become increasingly pro-active rather than reactive in the development of their indigenous ICT sectors. Many nations—both developed and emerging - recognise this reality and are developing and implementing their own broad ICT strategies. Today, previously entrenched local markets can come under attack from global competitors. South Africa is well positioned to resist this threat and seize the global imperative in selected areas by focusing on its core strengths. The country has a well developed urban infrastructure to build on, is an acknowledged leader in the application of ICT has one of the most advanced economies in Africa, has a wealth of local content from which to draw and has significant industrial strengths.

South Africa already has an established ICT sector. Furthermore, the country’s level of investment in ICT as a percentage of GDP appears to be comparable to that of most developed countries. There are currently a number of initiatives underway that either directly or indirectly impact on the ICT sector, and have been factored into the development of the strategy for the sector. Some of these initiatives receive donor funding while others are self-funded. In addition, there are a number of pan-African, SADC and international initiatives.

In terms of the human resource base, South Africa has an established, but relatively small base of highly skilled, predominantly white, ICT professionals. Most countries are experiencing a skills gap due to demand outstripping supply, but South Africa faces the additional challenge of bringing Previously Disadvantaged People (PDIs) into the ICT jobs mainstream. Training is currently the focus of a number of initiatives, such as, the DoC’s ‘Houwteq’ program, Telkom’s ‘Centres of Excellence’, PQ’s ‘PQ-Academy’ and the ICT Sector Training Board’s (ITITB) training programs. This is set against the backdrop of an education and training environment which has been restructured around Sector Education and Training Authorities (SETAs).

The growing convergence between education and training, particularly the important role of educational institutions in the corporate training arena and the growing move towards Internet-based delivery, in North America and Europe, is seen to fit well with the South African context. The country is aided by a strong and growing adoption of Internet usage relative to its overall economic standing in the world. 

In 1994, with a new democratic order being elected, South Africa entered a period of transition, dismantling structures established in the Apartheid era and replacing these with processes to empower and enfranchise all of the country’s people. The South African Government’s strategy for transformation is contained in the Growth, Employment and Redistribution (GEAR) program, formerly known as the Reconstruction and Development Programme (RDP).

The South Africa Information Technology Industry Strategy (SAITIS) project was conceived in this new era of change. The project was conceived, in 1995, by Mr. Jay Naidoo, Minister of Posts and Telecommunications at that time (and later Minister of Communications), and sponsored by Mr. Thabo Mbeki, then Deputy President. An important goal in conceptualising the project was to bridge the global development gap between the international ICT community and the South African ICT sector.

Initial stakeholder meetings were conducted regarding the SAITIS project, which resulted in the nomination of a group of 37 stakeholders as an Advisory Group to the SAITIS Project. This Group of 37 represented key organisations and agencies with interests in the ICT sector in South Africa. The outcome of these deliberations was a Project Design Document (PDD) to guide the direction of the project and to establish a Project Steering Committee (PSC).

The Government of South Africa was supported in the development of the PDD and subsequently in the development of the ICT sector strategy by the Canadian International Development Agency (CIDA) under its Official Development Assistance program for South Africa.

South Africa has entered a new democratic phase where participation and consensus building are important components of transformation. The SAITIS project recognises the importance of a broad range of stakeholder inputs and consequently, the processes developed for strategy formulation and implementation ensured that the key representatives from significant constituencies had an opportunity to provide input. One of the fundamental aspects of the strategy development approach was to ensure that the resulting strategy was designed by South Africans for South Africa.

Therefore, it is essential to recognise the contribution of key stakeholder groups such as government, industry, labour, academia and civil society in the development of this strategy. During the strategy development process, 600 representatives of these stakeholder groups took an active role in development of key elements of the strategy. In particular, they participated in a range of Working Groups, Workshops and Fora whose purpose was to identify, clarify and prioritise key issues to be addressed by the strategy. We wish to thank them for their personal time and the organisations that allowed them to participate on a volunteer basis.

The Project Steering Committee was instrumental in providing broad direction to the SAITIS project and strategy development. It was comprised of 9 constituents including CIDA.

South African Government involvement and contribution to this project has also been important. The two key government departments represented on the Project Steering Committee (PSC) were the Department of Communications (DoC), currently under Minister Ivy Matsepe-Casaburri, and the Department of Trade and Industry (DTI), under Minister Alec Erwin. The DTI was appointed as the lead counterpart agency to CIDA for the SAITIS Project. The DTI representative on the PSC, the late Mr. Ian Grant, Director: Electrical, Electronic and Allied Industries, chaired the PSC. In addition, DTI contributed to the funding of strategy development through the provision of services, office space and internal travel throughout the life of the project.

Securing coherent involvement and participation of companies comprising the ICT sector was also crucial to the creation of this strategy and industry associations played a pivotal role in this regard. Of particular significance was creation and participation of the Information Industry Association of South Africa (IISA), an overarching association representing ICT sector participants.

Labour commitment and involvement was secured by COSATU and NUMSA representation on the Project Steering Committee. This significantly helped to mobilise support and interest from a range of labour organisations and helped ensure that critical aspects of employment and empowerment were central themes throughout the process.

Engaging key members in the Academia world including the broader education community, namely, Universities, Technikons, the Department of Education, etc., ensured primary, secondary and tertiary ICT education requirements of the sector were factored into the strategy.

The SAITIS Project Team consisted of both a Canadian and South African component. Canadian participation in this project consisted of project management, project facilitation, as well as providing an external perspective on the development of this strategy. South African participation in this project consisted of project facilitation, project management and providing local research into the South African ICT sector.

The SAITIS Project Team was supported by a range of Canadian organisations, including Statistics Canada, Software Human Resource Council (SHRC), and the International Development Research Centre (IDRC) who provided valuable contributions.

Key resources used in the development of this strategy consisted of the Baseline Studies, which provided the status of the South African ICT sector as a whole including a jobs and skills component. Other resources used were the DoC’s info.com 2025 program, the National Research and Technology Foresight Project (sponsored by the South African Department of Arts Sciences, Culture and Technology (DACST), and the GEAR (Growth, Employment and Redistribution Program) Report.

How the Strategy was Developed

The strategy was developed in a top-down and bottom-up manner using the following strategy development framework (Figure 1):

Figure 1

The key steps in the process were:

Completing a Situation Analysis of the current situation with regards to the ICT sector in South Africa, including the international context in which it operates. This was a bottom-up process involving a series of Working Groups created to identify issues and opportunities pertaining to discrete aspects of ICT in South Africa.

The four Working Groups created for this purpose were:

• ICT Industry Working Group;
• ICT Usage Working Group;
• Human Resources Working Group; and
• Innovation Working Group.

A separate Indicators Working Group was established and charged with considering potential tangible objectives of the strategy and issues regarding measurement of progress against the project’s objectives.

The issues raised and discussed by the Working Groups were summarised according to the categories listed under each Working Group in the preceding diagram.

In addition to the Working Groups a series of thematic workshops, and Executive Fora were conducted, also with the purpose of identifying issues and opportunities. A list of the Participants for the thematic workshops can be found in Appendix G. The issues raised by these activities were referred to the appropriate Working Group for summarisation.

The specific SAITIS thematic workshops conducted were:

• Capital Mobilisation;
• Infrastructure;
• International Markets;
• Women in ICT;
• SMMEs;
• Management Skills; and
• Provincial.

Other sources of issues/opportunities for the Situation Analysis were the Baseline Studies, conducted for the SAITIS project by the International Development Research Centre (IDRC) office in South Africa under separate funding by CIDA, the Kimberley Workshop conducted by the Department of Trade and Industry (DTI) and the Executive Fora comprised of business, labour and academia representatives.

A complete list of the issues, and opportunities raised by Working Groups, SAITIS Workshops, Executive Fora, Baseline Studies and the DTI Kimberley Workshops, and Regional Workshops once completed are listed in Appendix E.

In parallel with the Situation Analysis a Strategy Outline was developed from the top-down using the Project Design Document as a starting point. The purpose of the Strategy Outline was to provide overall guidance to the Strategy Development activities.

Another step in the process was to identify potential strategic directions that both addressed the issues raised in the Situation Analysis and satisfied the overall intent of the strategy as articulated in the Project Design Document (and subsequently captured in the Strategy Outline). A Strategy Development Forum that included both the Project Steering Committee and the Working Group Chairs completed the process of rationalising the bottom-up and top-down approaches resulting in the ICT sector strategy articulated in this document. The strategy was subsequently ratified by an Executive Congress convened from senior executives representing all major stakeholder groupings.
 

Stakeholder Benefits

The Project Design Document identifies the following stakeholders as having specific interests in the outcomes of this project:

• Government institutions including the DTI, DOC and other Departments;
• South African industry including also the associations and networks such as, but not limited to, BITF (Black IT Forum), CSSA (Computer Society of South Africa), ITA (Information Technology Association), and the ITUC (Information Technology Users Council);
• Educational institutions including Universities, Technikons and Research Institutes such as the CSIR;
• Labour Unions such as COSATU (Congress of South Africa Trade Unions), FEDUSA (Federation of Unions of South Africa); and
• Civil Society (defined to be local community organisations as agents of social development, and participants in State/society policy dialogue and its decision making process.

The following two major beneficiary groups were further identified in the Project Design Document:

1. Organs of society: such as businesses (including SMME’s), government, labour, R&D/education/training, civil society organisations (NGO’s, CBO’s, professional associations, etc.); and
2. Individuals and communities: including women and those historically disadvantaged/marginalized geographic areas and individuals.

Reflecting the expected benefits that will flow from this project, the Project Design Document further states that, in the case of the first group, the ICT Sector Strategy will ensure mutual benefits to businesses in the sector, and to related institutions including those involved in education, civic services, labour and government.

In the case of the second group, focus is to be placed on the people of South Africa, by enabling access to knowledge, and empowering them through education, skills upgrading, and job creation.

As part of the strategy, particular emphasis is to be placed on those aspects related to ensuring equity on the basis of race, gender, disability, etc. for those that have been historically disadvantaged/marginalized in South Africa, consistent with related South African legislation and policies.
 

This is a strategy for the development of a strong South African ICT sector. However, the pace of technology innovation continues to challenge those who want to capture the concept of an "ICT sector" within one finite, all-inclusive description.

For the purpose of this strategy, the following OECD definition of the ICT sector was agreed to:

Developing a concise definition for the ICT sector is considered an evolving process. As the OECD grapples with this and potentially restructures the ICT definition, so will this strategy need to re-evaluate the adoption of a new definition by the OECD. Following is a discussion of the structure and evolution of the ICT Sector.

The ICT sector evolved and matured during the latter stages of the Industrial Age. It has only been recognized as a sector in its own right once the convergence of the Computing and Communications industries was acknowledged. The major industries comprising the ICT sector are generally acknowledged as including:
 

Manufacturing

• Computer Hardware; and
• Telecom Equipment

Services

• IT Professional Services (including custom software application development and maintenance);
• Computer Software (packaged software products – cross industry and vertical market applications); and
• Telecom Services

During the early stages of development, the focus was typically on measuring and increasing the production of the individual industries in the Sector.

In the Information Age, ICT as an enabler of overall socio-economic development is taking on greater importance than the development of ICT along strictly sectoral lines. This transformation in the role of ICT in the economy is depicted by the following diagram: (Figure 2.1)

Figure 2.1

The key elements of an Information Age model are:

Infrastructure

This is the communications, largely Internet based, underpinning of the Information Age. It is predicated on the notion that the communications network linking individuals, governments and corporations is a commonly accessible shared resource managed for the benefit of all users. In order to seek clarity of definition of what is meant by Infrastructure, the OECD has been developing a definition, and indicators, based on the industries (manufacturing and services) formerly considered part of the ICT Sector. This common base of reference is intended to allow measurement of the production and use of ICT in a meaningful and consistent manner.

Content

This is the information that is published and disseminated on the infrastructure. This information was initially largely undifferentiated and disaggregated thereby limiting its usefulness. It is the recognition of the importance of content that has led to the term Information Society as the next step in the progression and content aggregation has been proceeding apace for the last several years. As bandwidth increases and technology evolves, the nature and range of content is increasing rapidly. The intersection with cultural, and other, industries has again created a need for clarity of definition and the OECD is in the process of defining a Content Sector.

Applications

Until now, applications have been little more than tools for manipulating available information. The real information age applications have not yet started to emerge although they will inevitably result in the dramatic restructuring of Industrial Age industries. However, this area is where explosive growth is starting to occur particularly with respect to e-business/e-government. It is these business-driven applications, and associated content, that are expected to provide wide-ranging and lasting socio-economic impact. The underpinning of the information age applications is the enabling environment of e-commerce. At this time, the OECD definition activities are focusing on the e-commerce application enabling environment.

Figure 2.2 illustrates the relationship between infrastructure, content and applications as well as how this relationship is changing over time:

Figure 3.2

Whereas there is an already established ICT sector in South Africa, that sector is currently fragmented and acting without national purpose. The Industry Working Group, in addressing this issue, stated that it is necessary to establish credibility, coherence and convergence between all the involved parties and stakeholders to achieve the goals and objectives of the strategy. Furthermore, it was recognised that the South African ICT sector is part of the global ICT sector and is influenced by global ICT trends. This includes dealing with increasing competition in the sector, but also seizing the opportunities both locally and globally, and contributing to South Africa’s transition to an information economy.

It must be recognised that much of the sector’s current strength rests with the large indigenous companies and the foreign multinational enterprises (MNEs) that have chosen to establish a presence in South Africa. These companies already have a substantial share of the local ICT market, and are, in most cases, also active globally. Such companies include, but are not limited to, Telkom SA, Dimension Data, Datatec, IBM South Africa, ICL South Africa, Lucent Technologies, Microsoft SA, Nortel Networks, Novell, and others. Global ICT sector trends indicate globalisation and rationalisation of the business activities of these very large companies. In addition, the convergence approach to definition of sector permits a wider range of companies to potentially be included in South Africa such as State Owned Enterprises Eskom, Transtel, SABC, etc. Whereas the strategy is not interventionist with regard to the large companies, it is anticipated that these companies will change to adapt to the evolving domestic and global market opportunities. For example, telephone companies in some jurisdictions have transformed themselves into broad ICT companies encompassing telecommunications infrastructure and services, applications and content, recognising, in particular, the opportunities brought about by the Internet.

During the assessment of the issues relating to the development of the strategy there was a clear desire to increase rural and community participation in the sector. In this regard, it was recognised that there is a need to find ways to get companies to make investments in rural areas, rather than in known areas with an assured return on investment. The issue in strategy development is finding the appropriate balance between building an urban-based sector utilising relatively well developed infrastructure and resources vs. building a rural and very local community-based, indigenous sector that requires basic infrastructure and resources to be provided.

The Industry Working Group also addressed the need to find the mechanisms to expand and support the contributions that SMMEs can make to the sector, particularly new company formation and survival. In addition SMMEs are a recognised source of innovation for the new products, services and applications that the sector will require to satisfy the local market and to compete globally. SMMEs can also be an important source of the employment growth that the strategy seeks to achieve. The problem is that a strong entrepreneurial base does not exist in South Africa, particularly amongst Previously Disadvantaged Individuals. Furthermore, the survival rate of SMMEs is not high unless a favourable environment is created.