South African ICT Sector Development Framework

APPENDIX C: ICT Sector Definition

Introduction

The document includes a definition of the ICT sector based on ISIC codes developed for the OECD. It also includes a concordance developed by the SAITIS project team between the ISIC codes used by the OECD definition and the SIC codes used by Statistics South Africa.

The attached list of industries was approved by delegates attending the Second Ad Hoc Meeting of Indicators for the Information Society under the aegis of the ICCP Statistical Panel and is submitted to the ICCP Committee for declassification. The definition is a compromise, limited to those industries which facilitate, by electronic means, the processing, transmission and display of information, and it excludes the industries which create the information, the so-called ‘content’ industries. The definition permits the immediate gathering of statistics for international comparison in an area of considerable policy importance because of deregulation and technological change. The statistics and their comparison will contribute to the work of the next stage of the Panel which is the development of a similar list of content industries and a classification of products which belong to the information and communication technology (ICT) sector.

On the basis of this decision, it was further decided that the definition being proposed would not include any "parts" of industries but would rather include the entire industry even though in some cases the latter might not be strictly an ICT activity. Exceptions to this general rule, could be considered whenever it was felt, by the majority of countries, that the complete exclusion of an industry would mean the exclusion of a significant number of businesses which are producing ICT goods and services.

A set of principles was adopted that would provide a conceptual basis to the selection of industries chosen as "ICT".

For manufacturing industries, the products of a candidate industry must:

• be intended to fulfil the function of information processing and communication, including transmission and display; or
• use electronic processing to detect, measure and/or record physical phenomena, or to control a physical process.

Components primarily intended for use in such products are also included.

For service industries, the products of a candidate industry must:

• be intended to enable the function of information processing and communication by electronic means.

In the view of the members of the Panel, the ‘information economy’ consists of the economic activities of those industries that produce content, and of the ICT industries that move and display the content. These economic activities include the use of information and of ICT products by both people and business. The ‘information society’ includes the social impact of the information economy. These "working definitions" were seen as a means to promote discussion of the definitions of the constituent parts and of their boundaries. They could not be seen as final until agreement had been reached on the parts. The next steps in building indicators for the information society is agreement on a definition of the content industries which, when added to the ICT definition, will provide a working definition of the information economy. At the same time, the Panel will develop a classification of ICT products which will permit the gathering of statistics on the ICT output of industries not included in the definition.

The proposed definition of ICT includes the following International Standard Industry Classifications (ISIC Rev.3) industries:

3000 - Manufacture of office, accounting and computing machinery
3130 - Manufacture of insulated wire and cable
3210 - Manufacture of electronic valves and tubes and other electronic components
3220 - Manufacture of television and radio transmitters and apparatus for line telephony and line telegraphy
3230 - Manufacture of television and radio receivers, sound or video recording or reproducing apparatus, and associated goods
3312 - Manufacture of instruments and appliances for measuring, checking, testing, navigating and other purposes, except industrial process control equipment
3313 - Manufacture of industrial process control equipment
Services -- goods related
5150 - Wholesale of machinery, equipment and supplies
7123 - Renting of office machinery and equipment (including computers)
Services -- intangible
6420 - Telecommunications
7200 - Computer and Related Activities

After some deliberation, the Panel excluded the Reproduction of Recorded Media industry (ISIC 2230) as it was felt to belong to the content industries in ISIC Division 22, Publishing, Printing and Reproduction of Recorded Media. Retail sale of household appliances, articles and equipment (ISIC 5233) was excluded because the classification was felt to be inaccurate for the purpose intended. The same argument applied to wholesale trade, but it was possible there, using NACE, to offer guidelines for more precise reporting. This reflected the view that, although no part classes would be included in the definition, exceptions could be considered when the complete exclusion of an industry would mean the exclusion of a significant number of businesses which are producing ICT goods and services.  

The proposed definition results from the on-going work of the ICCP Statistical Panel, in collaboration with Eurostat and the Eurostat Task Force on Information Society Statistics.

Constraints of the OECD definition of the ICT sector

In defining the ICT sector in South Africa, constraints to the definition mentioned at the beginning of the strategy must be identified in the use of the OECD definition of the ICT Sector in South Africa.

Problems identified by Fred Gault:

Other issues identified;

• SIC codes do not adequately reflect the reality of technology changes that have occurred over the past decade
• Industry specialists rarely classify their data using the SIC codes
• SIC codes emphasize manufacturing as opposed to services
• SIC codes do not reflect the high degree of vertical integration evident in the SA ICT Sector

In addition, other Organizations utilize vertical sector definitions (used by the International Data Corporation Worldwide)

• Manufacturing
• Mining
• Retail
• Wholesale
• Finance, Insurance and Real Estate
• Services
• Public Administration
• Transportation, Communications, Electricity
• Agriculture, Forestry and Fishing
• Construction