South African ICT Sector Development Framework

The situation analysis will be examined from two perspectives: by the sectoral market trends in the global marketplace and by the industrial information age view point, where ICT is considered an enabler of infrastructure, content and application, human resources, policy and regulatory issues and industry structure.  

Entering the new millennium, countries will be faced with many challenges including heightened competition resulting from globalization. In many industries, ICT will become competitive resource that will be a determinant of survival and prosperity in the coming years. There are many global trends currently evolving that are predominantly driven by demand and supply of current technologies. The creation of an ICT strategy considered these trends and their relative influence on the development of the sector.  

Sectoral market trends continue to undergo remarkable transformations. Over the last 20 years the world has seen dramatic improvements in computer systems especially in computing power and storage capacity. One of the key factors driving the demand for ICT products and services is latent demand. The introduction to technology has the capability of stimulating demand for more products and services on an exponential scale.

The charts listed below, are derived from the 2000 edition of European Information Technology Observatory (EITO). Trends in each of the markets was derived from Gartner Group reports while information on international players in the ICT Market was derived from Standard & Poor’s Industry Surveys.  

In the worldwide market by geographic region, the U.S. dominates the ICT market with 36% followed by Europe with 31%. In terms of market segment, Telecom Services is the largest with an estimated $858 billion US$ for Y2001.

Asia is the largest importer of IT with 43%, followed by 34% in North America; while Japan and Other Asian countries are the largest exporters.

Regional Breakdown of World Exports of IT Products

Manufacturing

Computer Hardware
The Computer Hardware Market is expected to grow at an annual rate of 6.9% between 1999 and 2001. The US will hold a dominate position in this market with an estimated 40% share in 2001.

Trends

The PC segment of the computer hardware sector is considered the largest and most competitive with revenues estimated at 170 billion worldwide. Other components of the computer hardware sector include: workstations, entry-level server, mid-range servers, high-end servers, high-performance market. PC sales increased in every major market around the globe in the third quarter of 1999 while PC units shipped worldwide totalled 90 million in 1998. (source: IDC). Increased competitive pricing in this market has increased the concentration of those key players that are able to remain competitive.

In the future, computer hardware sector companies will be confronted with a number of challenges such as:

• The growth in size and density of chips;
• The decline in price points;
• The spiral of capital expenditure;
• The globalization of production; and
• The modularization of products.

Until recently, areas like the Asia/Pacific region and Latin America had witnessed stronger growth rates than the world-wide average. Since the later part of 1997, economic issues affected PC growth in those areas. The United States and Western Europe led the world-wide growth rates gaining 15% and 21% respectively in 1998. (according to IDC)

Asia – Pacific is expected to outpace the US. IDC forecasts the region will grow at a compound annual rate of nearly 25% during the period from 1999 through 2002, versus 10.5 % for the U.S.

Latin America represents less than 5% of the world-wide market PC shipments, but is forecast to grow above the world-wide average due to the low penetration of PCs in the region. IDC project a 16% growth for 1999 to 2002 for Latin America, combined with Eastern and Central Europe and the Middle East.

Major Players

Currently the top five PC vendors hold 43% shares in the market, forecasters estimated this will increase to 70% by 2000. Compaq Computer Corp, leads as the top vendor since 1994. Compaq’s share of the world-wide market grew to approximately 15% in 1998. The next largest PC vendors were: IBM (8.8% share), dell Computer Corp. (8.5%), Hewlett-Packard Co. (6.4%) and Packard Bell NEC Inc (4.2%) 

Telecom Equipment
Telecom Equipment will grow at an annual rate of 8.2% from 1999 to 2001. In Telecom Equipment market, Western Europe is estimated to hold the largest market share with 45% followed by the rest of the world with 32%.

Trends

The environment in which telecommunications companies operate change daily as a result of:

• The exponential growth of bandwidth demand;
• Deregulation;
• The stream of new communications technologies;
• The metamorphosis of existing companies; and
• The explosive entry of new companies into the market place.

Trade in telecommunications equipment is growing more rapidly than both the global economy and global trade in manufactured goods. In 1996, OECD exports of telecommunications and broadcasting equipment reached US$95.1 billion, which is:

• An increase of 5.4% over 1995, and an increase of 108% over 1990.
• The telecommunications equipment globally is increasingly becoming a software-based industry with bulk of R&D in the telecom industry being in software.
• Services revenue among OECD countries recorded a 65% increase and equipment revenue doubled between 1990 and 1996.

Major Players

Asia

Nippon Telephone & Telegraph (Ntt), the main Japanese telephone company, purchases a large portion of its communications equipment from NEC Corp (with telecom sales of $12.6 billion in 1999) and Fujitsu Ltd, $5.7 billion in the same period.

Canada

Nortel Networks based in Canada, has telecom-related sales of $17.3 billion in 1998. In its century of deploying communications equipment, Nortel has established relationship with U.S. telecommunications carriers to whom it now sells both wireless and wireline equipment. Nortel expanded into the fast-growing data networking business with its 1998 acquisition of Bay Networks.

United States

Among the leading U.S. companies is Lucent, with $34.74 billion in sales of telecom equipment (including related software and services) in most recent fiscal year ended September 1999. Lucent products include wireless, wireline, and more recently, data networking equipment. Another U.S. giant is Motorola, with 1998 telecom –related revenues of $20.5 billion. In the Computers Networking infrastructure equipment, 1998 Operating revenues for Cisco System - 8.5 billion and 3Com Corp - 6 billion.

Europe

Alcatel of France with revenues of $21.5 billion and Siemens of $16.0 billion in 1998 both have benefited from relationships with their national telephone companies. Both provide wireless and wireline products. Alcatel recently acquired Newbridge Networks in Canada. Europe’s largest telco, Deutsche Telekom, has focused on changing itself from a national network operator into a global telco service provider

Scandanavia

The two leading Scandinavian equipment manufacturers – Ericsson ( $21.1 billion in 1998) and Nokia ($13.85 billion) possess superior research and development resources and enjoy significant economies of scale in production of handsets and infrastructure. In addition Ericsson supplies wireline network products.

Latin America

The most active areas of telecom services privatization will Latin America. Over the past decade, Argentina, Bolivia, Chile, Mexico, Peru, and Venezuela have moved from government-controlled to private operations. Brazil, South America’s largest country, also completed its privatization by selling off pieces of Telebras, the country’s largest telephone giant.

Opening Latin America markets has been a slow, gradual process, which has been further interrupted by economic problems in the region. While many national governments have been willing to abdicate their leading role, they are usually slower to allow to allow competition in local and long-distance telecommunications markets.

Key U.S. and European telcos participating in the Latin American explosion include AT&T, Bell Atlantic, BellSouth, GTE, MCI, SBC, France Telecom, STET (Italy), and Cable & Wireless (U.K.), latin America’s largest telephone company, Telefonica SA (based in Spain), has also invested heavily in the major markets.

Services

IT Professional Services
The global market for IT services will grow at an annual rate of 10.1% from 1999 to 2001. In 2001, the US is expected to have a market share of 47% followed by Western Europe with 27%.

Trends

The IT Professional services is comprised of custom software programming, system integration, outsourcing, and consulting and training. Firms in this segment provides customized rather than standardized services. In 1998, worldwide demand for IT Professional Services approached $270 billion. This constituted a 13% increase over 1997. Although some moderation in growth has taken place, it is expected that the industry will exceed $400 billion in revenues by 2002. The main driver of this growth is "enterprise transformation." This constitutes a transformation process that causes organizations throughout the world to rethink their business models and business strategies in order to be competitive in a digital, network-based world. The Internet and e-commerce services market has derived a lot of growth and is expected to growth from $5.4 billion in 1998 to $32.7 billion in 2002. (Forrester Research)

Major Players
Some of the largest providers of professional services are IBM Electronic Data System with $30 billion annually, Electronic Data Systems Corp, (EDS) with a projected $18.5 billion in 1999 and Computer Sciences Copr (CSC). There are also many service providers who are not predominantly computer companies, such as Andersen Consulting, AlliedSignal Inc Boeing Co, etc.

Computer Software
The computer software market is expected to grow at an annual rate of 14.2% between 1999 and 2001. The US will also hold a dominate position in this market with a 45% share, followed by Western Europe with a 29% share.

Trends

The computer software market is driven by the ability to deliver better solutions faster and cheaper with every product cycle. The challenge is that the production cycles are only partly under the control of the industry participants. Software producers have to deal with radical technological change on a daily basis. These changes include:

• The Shift to the desktop;
• The impact of client/server;
• The emergence of UNIX and NT;
• Relational DBMSs;
• The World Wide Web; and
• Intranets.

Software technologies continue to grow at a rapid pace as does software piracy, which is a significant problem facing software firms.

Major Players

In the personal computer (PC) market, Microsoft corp. is the dominant worldwide supplier of operating systems and business applications, and the world’s largest software vendor. For 1998, Microsoft’s worldwide software license revenues totaled $16.7 billion. Oracle is the second largest independent vendor, recording revenues of $8.0 billion in 1998, including services. Computer Associates is in third position as an independent vendor with software revenues of $5.1 billion in 1998.

Carrier Services
The global market for Telecom Carrier services is estimated to have an annual growth rate of 8.8% between 1999 and 2001. The Rest of the World is estimated to have a dominate market position with 31% market share, followed by Western Europe with 29%.

Trends

As a result of increased competition from new local and long-distance carriers, incumbent operators are:

• Improving operating efficiency;
• Reducing service prices; and
• Upgrading outdated networks.

Incumbent carriers are maintaining their dominant position despite increased competition because:

• The advantages associated with national coverage;
• Brand awareness, and
• Distribution presence.

Emerging new telecommunications service providers have been active in competing with dominant carriers with value-added services.

Bundling of services will see more of, where the consumer will be able to select a telecommunications service provider who will provide, local and long-distance phone service as well as video and data communications.

Infrastructure, Content and Application Trends

Internet usage is increasing the amount of traffic flowing across the Internet and private corporate data networks and is driving the demand for increased bandwidth. New access technologies are geared towards providing increased bandwidth for consumers and small business for use in web based application.

The Internet’s exponential growth is expected to continue with the rapid proliferation of new web-based technologies. (International Data Corporation) IDC states the number of home users of the Internet and the WWW will grow more than 36% a year from 1997-2002. (In 1999, total number of users was at 196.1 million.). Small business will also exhibit strong growth in user numbers with Internet users increasing 34% each year until 2002, and WWW users increasing 48% for the same period. This impact will be driven by technological changes allowing for more advanced web-enabled applications and broadband technologies.

Infrastructure

Emerging bandwidth requirements stem from a combination of new application demands, business growth, networking needs, increased remote access and Internet access. Currently, analog modems (which use an analog phone circuit) are the most common method of access to Internet and data services by residential wireline users because of the its use of the switched telephone network. However, while this type of access has been generally affordable to Internet users, it utilizes slower speeds than current access technologies.

Fibre optic technology comprises the backbone of the Internet and is the cornerstone in supporting developments in new applications. Over the past ten years, the speed of Integrated circuits (IC) has increased by a factor of 60, whereas optical fibre capacity has grown by a factor of 2000. Fibre does not usually extend to end user devices, due to the cost and the nature of the technology, instead other forms of affordable technologies have been introduced to address the needs of PC users.

 xDSL

xDSL (Digital Subscriber Line) is a means of digital transmission using asymmetrical and symmetrical digital subscriber technology over telephone copper pairs to provide a dedicated form of high speed access to the Internet. There are approximately, 8 forms of xDSL technology. One example of xDSL technology is ADSL, which provides a dedicated connection that can deliver voice, TV images and on-line interactive data over a phone line using digital coding techniques. XDSL installations for business use will reach 711,700 by 2001 and over 5 million by the end of 2006. By 2006, 73% of business installations are expected in the Asia/Pacific Rim region. Only about 17% will be in the U.S. and 7% will be in Europe.

Cable modems

A cable modem is designed to connect a computer to a cable television (CATV) broadband cable to provide access to the Internet or to online services. Cable modems provide asymmetric bandwidth, and are commonly used for Internet access by residential customers. Cable modems offered increased speeds of 100 to 1,000 times faster than a telephone modem. This is a form of shared bandwidth and speeds for access are dependent of the number of users. Gartner Group predicts cable modems will emerge as the primary access method for consumers. The total number of cable modems installed in the world is estimated to be about 2.5 million. This number is expected to grow to over 8 million by the end of 2002. About 80% of all cable modems installed are in the US.

PCS

In 1998, approximately 18 percent of the worldwide telecommunications service revenue was generated by cellular services. Dataquest projects this figure will increase even further to approximately 23% by 2002. The next generation in cellular technology is called third generation cellular ,(3G), which allows for high-speed mobile data and voice applications.

In the next five years, the Internet and the portability of the mobile phones will converge to bring Internet access to very mobile phone. This will follow with video and data transmission. 3G technology promises to be 200 time faster than the current 9.6 thousand data bits per second the GSM platform allows. This technology will enable full-motion live video transmissions via mobile phones.

Fixed Broadband Services

Wireless technologies are popular in last mile area access. Countries around the world are providing spectrum capabilities to offer these services.

LMDS (MCS)

Local multipoint distribution service (LMDS) is a wireless, two-way multichannel technology capable of carrying data, voice and video at increased speeds

MMDS

Multichannel multipoint distribution service (MMDS) is a wireless cable technology used primarily to deliver subscription television service. It is a broadband service which accommodates multi-channel television.

Content and Applications

The millennium will see an increased acceleration toward convergence as the barriers inhibiting integrated communications and content fade away. How fast convergence will be deployed and become an integral part in every day life will depend on technological advances and their adoption by consumer and business alike. The move of ICT from the back office into the front office has driven the demand for increased bandwidth and improved applications. Developments in the convergence of voice, video and data with television and computers, and PCS will continue to evolve and improve in the millenium.

The following chart illustrates the wealth of Internet based applications currently available. Some of these key Internet based applications such as IP Telephony, network security and e-business are described in more detail below.

Voice-over-IP

There will be an increased use of Voice-over-IP applications in the future. Voice over IP uses packet switched networks, which can carry voice call very efficiently and provide telephony-quality voice. The costs associated with utlilizing this type of network are lower than traditional alternatives. Recently the focus has shifted from Internet telephony (carrying voice calls over the Internet) to IP telephony or Voice-over-IP using other IP networks, especially private network backbones. Internet telephony, the use of the Internet to carry long-distance telephone call, and thereby avoiding long distance charges. At present, the Internet is generally unreliable for high-quality voice telephony.

Network Security Trends

The importance of network infrastructures that support privacy, authentication or access control. The information security marketplace consists of a rapidly changing configuration of vendors deploying a range of tools and services. Gartner Group predicts, that by 2003, the product groupings we currently observe will change dramatically. In particular, the current firewall marketplace will generally disappear into router functions. The single sign-on and consolidated security administration product sets will merge. Password generators will become obsolete by smart cards bearing not only credentials but holding an individual's private keys and associated mechanisms for data security involving encryption, message authentication and digital signatures.

VPN

Virtual Private Networks – VPN technology enables secure communications over an IP network. It supplies data privacy and authentication. VPN products can enable an enterprise to implement limited access controls based on end-user identify. VPN technology supplies security, mobile and remote end-user access to the corporate network, extranet connections and improved intranet security is enable. The dominant driver of VPN will be to reduce remote access costs.

E-business

E-business is defined as the application of information technologies to facilitate the buying and selling of products, services, and information over public standards-based networks. Today, the leading edge of the Internet’s influence clearly is in the area of e-business. E-business is becoming the latest trend in business-to-business and consumer-to-business transactions.

More traditional industries, most notably financial services, media/entertainment, advertising and retailing have begun developing e-business models in order to benefit from the Internet as another medium for business transactions.

E-business applications over the Internet have grown in popularity over the last 5 years. 1998 witnessed approximately $50 billion in world-wide commerce transactions via the Web. This figure is expected to increase to 1.3 trillion by 2003, with business-to-consumer e-business accounting for $177.7 billion.

Source: E-business Technology Forecast, 1999 – Dataquest 1999

There are many types of business-to-consumer e-business applications. The diagram below projects the growth of these applications in the year 2002.

Standard & Poors Industry Reports, 1999

E-government refers to providing government services online. Listed below are countries that are developing nation-wide e-government initiatives:

• Australia – Australia has set a deadline of 2001 for the delivery of "appropriate" services online as part of its Getting Government Online strategy initiated in1997. Australia has developed a one-stop shop, Centrelink, which delivers close to 40 services for the federal government.
   
• Canada - The Government of Canada has identified the need for a government-wide IM/IT infrastructure as the essential link between the vision and the reality of government service delivery. The Strategic Infrastructure Initiative (SII) is a government-wide plan that responds to this need. It is designed to support the following objectives:

• establish a secure and trusted environment for electronic service delivery;
• improve access to government by citizens and businesses; and
• enhance the internal effectiveness of all government operations.

• Electronic service delivery is front and centre to the Government of Canada’s vision to make Canada the first national government to be fully online to citizens and businesses by the end of Year 2004. It intends to have significant online presence by December 2000, 50% electronic service delivery capability by December 2002, and full electronic service delivery capability by the end of Year 2004.
   
• China – China’s e-government project, which is aimed at encouraging government departments to put their information on the Internet, was officially initiated in January of 1999. The project is estimated to have at least 2,000 Web sites.
   
• Malaysia – Malaysia has introduced five pilot e-government initiatives under the Multimedia Super Corridor (MSC) project. The MSC project is designed to help Malaysia leapfrog into the information age and to become a developed economy by the year 2020. Of the seven flagship applications identified, four involve web-enabled applications to enhance public services (smart schools, electronic government, tele-medicine, and smart cards).
   
• New Zealand – New Zealand is implementing an e-government vision that promises to "serve citizens better, faster and cheaper in the new millennium". Its program is based on using technology to deliver government services in a tailored, inexpensive, easy to use, personal, and friendly manner. The government plans for New Zealanders to see the benefits of the e-vision initiative by 2005.
   
• Singapore – Singapore set a deadline of 2001 for "key services" to be provided electronically. Singapore has established an eCitizen centre on the Internet, which provides one-stop, non-stop, citizen-centric service delivery. eCitizen is part of the Public Service's PS21 service improvement initiative to integrate information and services across different government agencies to bring about greater convenience to the public.
   
• United Kingdom - The U.K.’s The Better Government White Paper, sets out a blueprint for the way government services will be revolutionised in the coming years, via information technology. The targets for electronic deliver of government services include: 25% by 2001, 50% by 2003 and 100% by 2008. The commitment to meet these targets was part of Prime Minister Tony Blair’s Modernising Government Vision of March 1999.
   
• United States – The U.S. is placing great emphasis on getting government services online. The 1997 report Access America committed the government to improve service delivery through technology. Since then, several programs have been initiated. The Government Paperwork Elimination Act of October 1998 mandates federal agencies to provide for the optional use and acceptance of electronic documents, signatures, and record keeping where practicable, by October 2003. The Federal Electronic Commerce Program provides the policy framework to support e-commerce, help government agencies find and use the best e-commerce tools, and disseminate the most promising ideas across government.

Not all countries have national e-government agendas. Many are tackling e-government, one program or application at a time.

• Denmark – The country has created an efficient taxation system that saves time and money for both the government and the public. It uses available data from employers, financial institutions and unions to create an electronic tax assessment – which either comes with a cheque or a payment form. Tax assessments can be corrected or reviewed, but for most citizens of Denmark, taxpaying is now a single transaction instead of a time consuming accounting process.
   
• Europe - Europe’s ELPRO is the Electronic Public Procurement System for Europe – a pan-European, digitally enabled public procurement system. By creating a standard for electronic procurement across Europe, ELPRO facilitates the movement of government supplies between European countries.
   
• The Netherlands – Public Counter 2000 is the Netherlands’ 24-hour, integrated citizen access to government programs combining electronic access via virtual counters with face-to-face access to physical counters and staffed by public servants. The aim of the program is to develop an integrated public service rather than integrated access to discreetly organised ministries.
   
• Portugal – INFOCID in Portugal is a one-stop public service access point created by the government. It includes access through kiosks to information and services in areas such as health, education, military service, taxes, and licenses. In a public-private partnership arrangement, it will rent access via 1000 ATMs by the year 2002 at half the cost that it takes to establish freestanding INFOCID kiosks.
   
• Spain - The region of Valencia has used a community Intranet to make local government much more accessible to citizens, with value-added services such as access to online shopping, and the broader Internet.

Consolidation has been one of the most predominant structural trends witnessed in the economy over the last ten years. Consolidation involving mergers and acquisitions have increased to allow for greater competitive advantage in the market. The latest decade has witnessed many mergers and acquisitions on an international scale. Mergers that have taken place in the voice/data market for 1999 are shown below.

Voice/data mergers in the Telecommunications Industry in 1999.

Another acquisitions in the year 2000, was the Alcatel/Newbridge on February 23, 2000. Newbridge entered into a definitive agreement to be acquired by Alcatel , a world leader in end-to-end voice and data communications solutions systems. Alcatel's leadership in broadband access combined with the Newbridge leadership in ATM / MPLS / IP switched routing will make it one of the top players in the next-generation networking market with complete, end-to-end communication solutions.

Content Mergers

Another consolidation trend that has taken place is in the area of content acquisition. In January 2000, Time Warner agreed to merge with AOL in an all-stock combination valued at $350 billion. The result was the creation of AOL Time Warner , a media and communications giant with combined revenues of more than $30 billion. This deal combines the world's biggest E&M group with the top ISP. It is the first large transaction where a traditional company with mainly non-internet interests agrees to an all-share takeover from an internet company. Stands to make Time Warner the country's most influential cable-TV operator, even though it won't have as many cable subscribers as AT&T.

Two weeks later, Time Warner made another announcement: Its music division was joining up with Britain's EMI Group to create the world's largest music company, Warner EMI Music.

Analysts expect the new conglomerate to take advantage of AOL 's broad Internet reach to distribute music, video, and other entertainment content from Time Warner and EMI. And to capitalize on broadband, AOL is developing an interactive service called AOL TV.

Telecommunications Mergers

In June 1999, AT&T agreed to merge with cable operator Media One Group in a deal valued at $58 billion. Additionally, in March 1999, the company completed its acquisition of cable operator Tele-Communications Inc. (TCI).

WorldCom, created in 1996 through the merger of three front-line, high-tech growth companies – LDDS WorldCom, MFS Communications and UUNET Technologies. WorldCom emerged as a company capable of bundling local, long-distance, international, and Internet service over its own fibre-optic networks. Worldcom’s landmark acquisition of MCI Corp, the second-largest long-distance company, was completed in July 1998.

International Alliances

Multinational telcos are serving the needs of customers by expanding local operations in high-growth countries. AT&T and British Telecommunications agreed in July 1998 to create a $10 billion joint venture. In April 1999, the two companies agreed to buy a 30% stake in Japan Telkom for $1.8 billion. AT&T also joined forces with Dutch, Swiss, Swedish and Spanish phone companies to found a venture called Unisource. The Global One alliance matches Sprint Corp. with Deutsche Telekom and France Telecom. Concurrent with that alliance agreement, the two foreign carriers jointly purchased a 20% stake in Sprint. Meanwhile, MCI Worldcom has banded together with Spain-based Telefonica SA, Latin America’s largest telecom provider.

What does this trend mean for South Africa. South Africa will need to evaluate the benefits of promoting partnerships on an International scale in order gain a competitive advantage against other international players.

Governments are taking an active role in developing policies which promote the development of the ICT sector. One of these policies many governments have been undertaking over the last decade is that of liberalization of telecommunications. Sixty-nine countries including 35 economically less developed countries signed the WTO basic telecommunication agreement to open up the world’s market to competition. The agreement states the basic principles with which the country to open up their telecommunications market to deregulation. In 1998, the European Union marked the final preparation for the full liberalisation of its market by the 1^st January 1998. There was also a move towards the establishment of independent national regulatory authorities and a trend towards privatisation of incumbent telecommunications operators.

The Brain Drain and ICT skills gap are two of the most commonly used terms to describe the state of the human resource problems in the ICT sector. Most countries are experiencing an ICT skills gap due to the demand for skilled labour that is greater than the supply. This is inclusive of managerial positions. The Brain Drain refers to the migration of skilled workers to other countries for better wages and working conditions. Many countries are increasing the number of immigration working visas, such as Canada and the US, to make it easier for ICT workers to enter the country.

WorkPlace

Distance and time are no longer limiting factors in production. Companies can operate 24 hours/day by positioning activities in different time zones, take advantage of less costly, local labour skills while maintaining head offices in large urban centres. Greater flexibility in the labour market through the remote access and outsourcing of resources are becoming the norm for ICT companies and are redefining traditional work methods.

The OECD report, Technology, Productivity and Job Creations, 1996 illustrates some of these global trends among OECD countries.

• Many OECD countries show an employment structure shifting towards high-skilled workers;
• Aggregate productivity growth remains modest, but the combination of technological change, organizational change and upskilling helps many firms achieve strong productivity growth and job gains;
• Two thirds of OECD production and 70 percent of jobs are in services, whose nature is being transformed by information technologies, innovative efforts and upskilling.
   

The global trends outlined above will no doubt influence the development and direction of the ICT sector strategy for South Africa. The global ICT sector is continuously evolving through the development of new technological advances and their subsequent impact on human resources issues, policy and regulatory issues, and the structural definition of the market. As such, a competitive strategy for today’s ICT sector must be proactive, innovative and adaptable in its response to tomorrow’s trends so as to ensure South Africa becomes and remains competitive in the global ICT market. Some of the current trends to take into account:

• Sectoral market trends – The growth rate of certain sectors. Computer Software has the highest annual growth rate from 1999-2001 with 14.2%.
• Infrastructure - Fibre Optics, ADSL, Cable Modems, PCS are all growing in popularity offering different services based on the users needs. Wireless has become popular for last mile area access.
• Content and Application Trends – The popularity of the Internet, the drive for more content, and the growth of related applications including e-business are predicted to become even more popular in the coming years.
• E-government – Governments around the world are realizing the importance of providing services in a more efficient manner through the use of the Internet and on-line access.
• Structural trends - consolidation in the ICT sector is a trend that will continue as large companies try to develop a dominate market positions through horizontal integration techniques
• Policy and regulatory trends - Deregulation and privatisation, there impacts and results in markets around the world
• Human resource trends - the brain drain and ICT skills gap is a global trend that all countries are experiencing.

Privatisation in the Africa is becoming an increasing trend across the country. In the Southern part of Africa, the state-owned telcos in Lesotho, Malawi, Tanzania, Zambia and Zimbabwe are all at some stage of government divestment. The Government of Botswana announced plans for privatisation in their current budget and BTC could be amongst the first to be sold. The Mozambican Government has also expressed considerable interest in following the asset sell-off route to improved telecommunication. In East Africa, Uganda, Kenya and Ethiopia are all likely to follow the privatisation route. In the West, with the experience of some recent successes, Africa’s largest market, Nigeria, is likely to see the privatisation of "Nitel" in the not-too-distant future. Hopefully, in Africa’s move towards increased privatisation, there will be opportunities for small investors to take a part in the long-term benefits of the inevitable growth in revenues and profits.

With increasing activity and consolidation in the sector, the future looks promising for Africa. Africa is currently undergoing a rapid transformation and is outpacing the global average for growth in number of Internet host systems. From July 1998 to January 1999, the number of Internet hosts grew at a rate of 38 percent (from 7,800 to 10,703) while the world-wide average growth rate stood at 18 percent.

Internet development in Africa is constrained by poor telephone infrastructure, low international bandwidth and high dial-up tariffs levied on the Internet hosts. Access to the Internet is mostly in major cities, more often the elite. Approximately, 70 percent of Africans who are rural dwellers and do not have access to Internet technologies.

Africa has strong support from various Francophone support agencies concerned about the dominance of English on the Internet. The result of this has been projects for French-speaking countries. The result, increased levels of Internet penetration and more institutional connectivity than non-French speaking countries.

There have been many initiatives to assist Africa in the development of an ICT sector. Some of these are:

• The South African Development Community (SADC).

A 12-member community comprised of Angola, Botswana, Lesotho, Malawi, Mauritius, Mozambique, Namibia, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe. The SADC aims to increase economic cooperation and integration, cross-border investment and trade, and ease the movement of goods, services, and people.

It’s main objectives are to:

• Achieve economic growth and development;
• Alleviation of poverty; and
• Enhance the standard and quality of life of the region.

Areas of cooperation include transport, communications, food, agriculture, finance, tourism, mining and energy, and others.

The Common Market for Eastern and Southern Africa (COMESA)

Comprised of 21 member states and representing 385 million people. (South Africa is not a member) COMESA was established to encourage regional economic integration and co-operation as a means to increase investment, production, and growth in the region. In early 1998, an initiative was undertaken to promote the establishment of a regional telecommunications network, known as COMTEL. The aim of COMTEL is to facilitate increased trade relations within the region of Eastern and Southern Africa. The COMTEL network will be managed as a private limited liability company with an investment cost of approximately US $300 Million. South Africa has a role in this initiative.

The African Connection Initiative

This initiative began in 1998 with the support of 44 member nations of the Pan African Telecommunication Union (PATU). The PATU developed the African Connection Initiative to enable major improvements in the telecommunication infrastructure on the continent.

The African Connection aims to provide a network that will allow African countries to communicate with each with greater ease. A target of 50 million lines is to be installed over the next 5 years.

The African Information Society Initiative (AISI)

AISI was conceived in 1995 at the African Regional Symposium on Telematics for Development. This Symposium was organised by the Economic Commission for Africa (ECA), the International Telecommunications Union (ITU), the United Nations Educational, Scientific and Cultural Organisation (UNESCO) and Canada’s International Development Research Centre (IDRC). AISI is an action framework to build Africa’s information and communication infrastructure. It is to be implemented by the Union Nations Economic Commission for Africa (ECA) and its partners who work together with African member States in the Partnership for Information and Communication Technologies in Africa (PICTA).

Despite the "political miracle" of 1994, the country continues to be socially and economically divided. The country is burdened with the economic reality of having to redress the legacy of apartheid in terms of education, poverty alleviation, inequitable health care and a burgeoning crime and violence situation. Although South Africa appears prosperous compared with other countries in the region, approximately 46% of the population live on or below the subsistence level. The human development index (HDI) is 0,677 which ranks South Africa 94^th in the world. (Statistics in Brief, 1996 based on 1980 and 1991 data). Key statistics on the socio-economic situation in South Africa have been provided by the SAITIS Baseline Studies.

Population

Based on 1996 Census data, the population is estimated to be at 40.58 million – 58% have access to electricity, 45% have running water in their homes, only 61.4% are literate, 54% live in urban areas.

Among the 31.3 million African who were living in south Africa in October 1996, only 13.6 million (43%) were living in urban, and 17.8 million (57%) in non-urban areas. Of the population 3.7 million coloureds, 3.1 million (84%) were living in urban, and only 609,000 (16%) in non-urban areas. This pattern is not so easily found among males and females in the other population groups, since the vast majority of people in these groups were already living in urban areas.

• Gauteng has the largest population of people living in urban areas (97%), followed by the Western cape (89%). The Free State (69%) and Northern Cape (70%) had relatively high proportions of people living in urban areas, but these were largely small towns. The province with the smallest proportion living in urban areas is Northern Province (11%), followed by North West (35%) and Eastern Cape (37%).

The economic impact that HIV/AIDS will have on South Africa is yet to be determined. An estimated 4.2 million people or just under 10% of the population in South Africa were infected with the HIV that leads to AIDS at the end of last year. This estimate was drawn from the results of the 10^th national ante-natal survey, which indicated a national HIV prevalence rate of 22.4 percent for 1999, compared to 22.8 percent for 1998.

HIV prevalence was slightly higher in the 30 to 34 year old group and in the 35-39 year old group. People in their twenties constituted more than half of the infected population. KwaZulu-Natal remains the province with the highest prevalence rate with 32.5% in both 1998 and 1999. Western Cape the province with the lowest level of infection, with 7.1% in 1999.

It is estimated that South Africa’s population growth will fall to 0.8% by 2005 and into decline even further thereafter. AIDS-related deaths will increase from the current 400 000 per year to between 800 000 to 1 million, with life expectancy decreasing from 68 to 48 years. The Actuarial Society of South Africa predicts that by 2005, about 4 million families will experience a 20% reduction in discretionary funding due to higher taxation to cover State medical spending and personal medical costs.

To date little research has been done on the economic impact the HIV/AIDS situation will have on companies given the high prevalence rate of HIV/AIDS of men and women in their twenties and thirties. The impact this will have on Human Resources and the availability of ICT skills in the country is yet to be determined.

The Department of Health estimates that by 2010, there will be 2 million orphans in South Africa due to their mothers dying form AIDS. An antenatal conducted by the department of Health revealed that in 1998 1 in 5 pregnant women were infected with HIV. It is estimated that by 2005 6 million South Africans will be infected with HIV.

In addition to the social impact of HIV/AIDS, the World Bank estimates that once 8% of the population is infected, per capita growth is 0.4% less than it would have otherwise been. Once infection levels reach more than 25% per capita growth is at least 1% lower per annum than it would have been.

 Infrastructure

• According to the World Bank, approximately 59% of the population has access to safe water and 58% have access to electricity;
• The 1995 October Household Survey, states that 32.3% of households have access to a fixed line or cell phone in their homes. Telephone Lines per 100 people - 11.2 (1997);
• Rural telephone lines per 100 people 2.2 (1997);
• Connected telephone lines - 4.8 million; and
• Cellular subscribers 2.5 million.

South Africa was the largest African recipient of Foreign Direct Investment in 1997, but fell to 7^th position in 1998. The UN Conference on Trade and Development (UNCTAD) world investment report stated a decrease in privatisation-related investment and reduced investment by Asian companies as the primary reasons. SA received US$371 million in 1998.

Education

• The inequities created in South Africa due to apartheid are highly visible in the education system;
• The vast majority of schools with computer facilities are urban based and predominantly white;
• Approximately 50% of the country’s schools have electricity, and 75% have running water;
• Approximately 7.5% of South African schools have adequate telephone lines, electricity and computers to contemplate the use of IT in schools;
• IT infrastructure in schools follows closely the socio-economic profiles of the various provinces with the Western cape and Gauteng having the best infrastructure;
• Fewer than half of pupils who obtained a Senior certificate passed with mathematics (44.2%)while fewer than 10% passed with mathematics on the higher grade;
• Over a third who obtained a Senior Certificate passed with physical Science, an justo over 10% passed with physical science on the higher grade;
• A mathematics and/or physical science pass o higher grade are usually the minimum requirements for person who want to obtain a university qualification in IT;
• 1996 figures from the schools register of Needs Indicate that of 27 066 schools countrywide, 2 241 have computers totalling 34 843 between them;
• More than 90% of schools do not have access to computers;
• Most schools use IT for administration management purposes, and not to support learning initiatives; and
• In only less than half of the secondary schools surveyed, did learners spend more than three hours per week on computer learning skills.

Employment

• Current unemployment rates in South Africa, (based on 1996 Census data), are estimated at 33.88%, with the highest unemployment occurring in the Eastern Cape (49%) and the Northern Cape (46%).

Communications

• There is great discrepancy amongst the white and the black South Africans, when it comes to access to communications;
• 98.4% of whites own radios and 96.5% have televisions sets. However, only 86.7% of blacks own radios and a mere 48.3% have access to a television set; and
• Overall, only 32.2% of households have access to a fixed line and/or cellphone in their homes.

Internet

• During 1998, demand in South Africa for connectivity to the Internet grew even more rapidly than in the preceding four years. The number of dial-up subscriber accounts of all ISPs combined, grew by more than 100%, reaching 370,000 by year-end 1998;
• The number of individual Internet users, including those who have access via corporate networks, reached nearly 1 million at the end of 1998 and is expected to reach 3.5 million by 2003;
• The Internet is expected to be a major catalyst for further growth in e-Commerce in the years ahead. There is now a substantial installed base of devices and users accessing the Web, and in many areas, there is an incentive for these users to transact on-line; and
• There is also a growing local merchant presence on the Web. South African Web shoppers are able to buy directly overseas through the Web. In 1998, there was a large investment on the part of major IT and other industry players seeking to be facilitators of the future e-Commerce supply chain.

• Currently, South Africa is the 20^th largest country market for ICT products and service, accounting for 0.6% of worldwide revenues;
• The combined market for IT hardware, software and service (excluding Telecommunications Services) is set to exceed R40 billion (US $6.6 billion) in 2003, up from just under R20 billion (US$3.3 billion)in 1998 (BMI – TechKnowledge, 1999);
• The ICT market alone is projected to grow to R30 billion in 2000, with a CAGR increase of 16%. The converged market projection for 2000 is R43 billio
• The growth of the Home Office ICT market is of particular interest;
• Revenues in 1997 were R1.4 billion, over 5% of the total ICT market, and significantly larger than several important sector; and
• PC sales account for over 50% of revenues, and are expected to grow at approximately 15% into the next millennium.

The chart below demonstrates the growth in ICT spending from 1992 to 1997. The software Industry has provided the most growth with 133% increase.

Growth in ICT Spending

Growth in the product and services segment of the ICT sector will remain relatively the same until the year 2001.

Leopold and Associates produced this graph from BMI-T for the workshops. It illustrates projections for 2001 for specific categories of the IT market . Services illustrates the most growth with 39%.

SA IT Market by Category

The South African ICT sector can also be divided similar to the global market by Manufacturing and Services providers. The information provided in the following section is derived from both the Baseline Studies and the Foresight Report.

Computer Hardware
Revenues derived from sales of computer hardware were R12.8 Million for 1998. Over 95% of computer hardware revenues by distributors are from imported products and components. The beginnings of trade liberalization under the GATT agreement has seen tariffs on computer equipment come down in the early 1990’s to a flat rate of 6% for both hardware and imported components. Several major brands have stimulated local PC assembly due to the flexibility it provides for servicing the local PC market. Hardware manufacturing and assembly capabilities within South African have provided export opportunities, 30% going to Africa, but this market is very small and limits the growth of an export sector.

South Africa has relatively low tariff levels on computer hardware because higher export levels have eliminated the need to raise tariffs in order to protect the balance of payments. The maturity of the local ICT market is reflected by the estimated 60% of PC’s that are connected to networks (LAN or WAN), which compares favourably with developed nations.

Telecommunications Equipment
South Africa is the largest importer of telecommunications equipment in sub-Saharan Africa. Imports have more than doubled from R 389 million in 1997 to R808 million in 1998. South Africa telecommunications sector is the largest in Africa measured by the number of fixed lines, number of cellular subscribers, data services users, financial revenues and investment, technological capability and local equipment design and manufacturing capabilities.

The intervention system of long term contracts was abolished in the early 1990’s, soon after Telkom was formed, resulting in prices of telecommunications equipment dropping by about 15% per annum. The local supply industry was estimated to have a turnover of roughly R3 billion in 1993/4, employing approximately 7 200 people. Exports of telecommunications equipment in the area of R120-R150 million.

Services

IT Professional Services
The South African professional services sector had an estimated revenues of R2.3 billion in 1995 with ICT consulting making up 31.8%, custom application development 22.2%, implementation 20.3% and ICT education 14.6%. The sector has been growing at an actual annual rate of 10.9% for the period 1991-1995. The sector has begun to export their services to other countries in sub-Saharan Africa, but a major constraint on growth of exports is the lack of ICT adoption and sophistication throughout the region. Baseline Study reported Revenues derived form sales of IT Professional Services – Notional to be R5million in 1998.

Computer Software Industry
In 1995, the local packaged systems software market recorded sales of R1.1 billion of which 40% was operating systems, 20% network software and 40% application development tools. Packaged application software recorded similar sales. Growth in both components was high with systems software recording an average annual dollar growth rate for 1991-95 of 13.5%, with 11.1% for application software. Baseline Study provides notional spending on revenues derived form sales of locally developed packaged software of R285 million in 1998 with consumer spending on local software at R20 million.

Package systems software industry: South Africa package systems software is 100% imported, with about 88% of it coming from the USA.. Packaged application software industry: the local industry has made some inroads into the packaged application software market where market entry is easier and there is less risk for the client if they go for a lesser known brand. The sales figure for 1995 of R110 million gives locally developed products a mere 10% share of this lucrative market. Local software developers have targeted niche markets preferably where local requirements differ from international standards. Exports of software from South Africa were estimated in 1996 at 3% of the total market (approximately R30 million)

Telecommunications Services
South Africa is the telecommunications leader on the African continent, containing a third of all main lines and 85% of all cellular subscribers. Telkom is a government owned telecommunications company has assets of approximately R16 billion, and is the 28^th largest telecommunication operator in the world. Its fixed line telephony monopoly is to be phased out over a 6 year period according to the White Paper on Telecommunications Policy from 1996.

Telkom plans to install 2.8 million new lines including 120,000 payphones by 2002, with 1.6 million new lines in currently under-serviced areas. Ultimately, the aim is to install 4.3 million new lines in eight years financed by cashflow and debt. Integrated service digital network (ISDN) facilities have been offered by Telkom since 1995. Three licenses were issued to Telkom in May 1997 which are valid for 25 years and are for PSTN, transmission of radio frequencies and VANS. A second national operator will be licensed as soon as 2000 or the latest 2001.

Cellular Telephony (Mobile Communications)
The growth of South Africa’s cellular market has grown tremendously over the last decade, by generating at least R10bn. And has the largest Global System for Mobile Communications (GSM) market outside of Europe, and the fourth fastest growing Gsm market in the world. The two cellular licenses are owned by Vodacom and Mobile telephony Networks (MTN).

ISP Services
South Africa’s use of the Internet has made it the 14^th largest Internet country market. IDC estimates Web based global electronic commerce in the region of $200 billion by the year 2000. With the advent of the World-Wide Web corporate use of the Internet is the most rapidly growing aspect in South Africa. ISP’s revenue are estimated at R700 million in the year 2000. While ISP’s have a 60% share of the overall service market, other types of organization such as creative houses, account for a further 40% of the Internet services market.
 

 Players in the South African ICT Market

SA Government Members
Department of Arts, Culture, Science and Technology (DACST)
Department of Communications (DoC)
Department of Public Service and Administration (DPSA)
Department of Trade and Industry (DTI)
South African Telecommunications Regulatory Authority (SATRA)

Association Members
Association of Field Service Managers (ASFM)
Black Information Technology Forum (BITF)
Black Management Forum (BMF)
Computer Society of South Africa (CSSA)
Electronic Industries Federation (EIF)
National Information Technology Forum (NITF)
South Africa Council for Automation and Computation (SACAC)
South Africa Institute of Electrical Engineers (SAIEE)
Steel, Iron and Engineering Federation of South Africa (SIEFSA)

Parastatals & Service Provider Members
Africa Telecom Forum (ATF)
Eskom
Internet Service Providers Association (ISPA)
Telkom
Transtel

Human Resource (Training) and R&D Members
Centre for the Development of IT Policies (CDITP)
Council for Scientific and Industrial Research (CSIR)
Foundation for Research Development (FRD)
IT Industry Training Board (ITITB)
Naledi
South Africa Institute of Computer Scientists & Information Technologists (SAICSIT)
Universal Service Agency

Labour Members
Congress of South Africa Trade Unions (COSATU)
Communications Workers Unions (CWU)
Federation of Unions of South Africa (FEDUSA)
National Council of Trade Unions (NACTU)
National Union of Metalworkers of South Africa (NUMSA)
South Africa Commercial, Catering and Allied Workers Union (SACCAWU)
South African Society of Bank Officials (SASBO)

Business/Industry Members
Information Technology Association (ITA)
IT Users Council (ITUC)
South Africa Chamber of Business (SACOB)

Civil Organization Members
South Africa National Civics Association (SANCO)

In 1998, the Presidential review commission report outlined some recommendations on the Information Management, Systems and Technology in the Public Service. Some of the observations and conclusions of this report are stated below.

The Information Management, Information Systems and information Technology (IMIST) in the public service is currently undergoing a transformation. Previous problem with in the public service deal with the large investment of financial resource that the country has already invested in technology and systems, and the ability to leverage this investment in a reasonable way.

The current investment into ICT was made in a highly fragmented and inefficient manner and economies of scale are not being realized. Some believe that the current systems in place may act a major constraint to realizing objectives of improved service delivery. There is also an inability to recruit and retain appropriately skilled personnel and to manage ICT procurement.

IMST use in the government was for transaction and control purposes for many years. However, new management information system are being utilized to supply strategic planning and policy decision making. The use of IMST is also being tested to enable the electronic delivery of certain public services through kiosks and other mechanisms.

The State Information Agency (SITA) was created in January 1999 to assist in addressing the government’s ICT problems. The purpose of SITA is to provide ICT related services exclusively to the Public Service and ensure guaranteed performance levels. Individual state departments are at liberty to use the service of SITA if they so choose, but are not mandated to use their services.
 

Key Players in the South Africa ICT Sector organized by sector, as well as by profit as a % of Turnover.

There are three sectors on the JSE which could broadly be classified as belonging to the IT sector:

Market Capitalisation 11/01/00 (R million)

Other characteristics of the ICT sector including Key Players

• Four companies (M-Cell, Dimension Data, Comparex and Datatec) account for 70% of the Market Capitalization;
• The combined market for IT hardware, software and services (excluding Telecommunications Services) is set to exceed R40 billion (US $6.6 billion) in 2003, up from just under R20 billion (US$3.3 billion in 1998);
• Definitive information is only available for those companies listed on the Johannesburg Stock Exchange, information on SMMEs is gathered by surveys;
• IT companies have increased in past 2-3 years;
• 125 new black IT companies in the past 4 years;
• Total Foreign Direct Investment (FDI) into South Africa declined in 1998. South Africa received R2.25 billion (US$371 million) as opposed to R10.3 billion (US$1.7 billion) in 1997; and
• South Africa was the largest recipient of FDI in 1997 but fell to 7^th in 1998.

Both Transtel and Eskom are significant private networks operators in South Africa. They are currently not allowed to compete with Telkom.

Vodacom and MTN ( Mobile Telephone Network) are the two cellular operators in South Africa, both employing GSM 900 technology. They are both obliged to use Telkom for their fixed line requirements. They have over 2 million subscribers. Both Vodacom and MTN have invested over R3 billion each in their current network infrastructure with plans to increase.

Datatec – Value-added Distributor of high-end networking and data communications equipment, Internet Service Provider, Internet Application solution provider, IT training and software development. Obtains 50% of revenues form UK, USA and Australia and is expanding into these markets.

Dimension Data: Focuses on key business areas of Communications, online systems integration, interactive and outsourcing. It has a strong overseas presence in UK, Asia, Australia and Africa

M-Cell – An investment holding company with interests in the cellular telephone industry: in particular, the MTN GSM network, currently one of two authorised cellular operators in South Africa, and with expanding interests in Africa

Multinationals are represented in South Africa by locally owned companies and by large multinationals who operate subsidiaries in the country. IBM, Unisys, Microsoft, ICL, Intel, Systems Applications Products (SAP), Dell, Novell and Compaq.

A listing of all key players including, Government Agencies, Association Members, Labour members etc. in the South Africa ICT sector can be found in Appendix J. 

This chart illustrates the elements of Innovation and their relative strengths/weaknesses in Gauteng and Cape Town. Entrepreneurship, Education and R&D Institutions, Regional Strengths are relatively high for both cities.

South Africa’s R&D expenditure is approximately 0.8% of GDP. Though below most OECD countries, this compares fairly well with many newly emerging countries and developing countries and is well in advance of other African countries. Since ICT is a basic technology which is increasingly used in almost all fields of research, accurately estimating the amount of R&D in the ICT sector is problematic.

Overall, research on computer sciences represented only about 2.3% of total R&D spending in 1993. The business sector had a greater involvement in funding computer science R&D, representing 63.4% of total funding in 1993. This suggests that ICT R&D is more geared to business applications than to the more exploratory basic research conducted at academic institutions. Business sector support for R&D was geared for the most part at the telecommunications industry – adapting technologies, particularly software, for local conditions.

R&D no doubt influences Innovation in South Africa as do SMMEs and their part in innovation. The recent global trend has proven this by the increased number of consolidation between larger international firms and smaller innovative SMMEs.
 

There is international momentum towards liberalization of trade in the ICT markets. South Africa is involved in International Organizations which support these type of initiatives.

• South Africa is a founding member of both GATT (General Agreement on Tariffs and Trade) and the WTO (World Trade Organisation);
• South Africa has also bound market access and national treatment under the General Agreement on Trade in Services (GATS) for several categories of services and pursues a reasonably open policy on Foreign Direct Investment with some exchange control and immigration limitations;
• South Africa is a full member of the International Organisation for Standardisation (ISO), the International body responsible for developing standards in all technical fields except electrical and electronic engineering;
• South Africa is also a member of the World Intellectual Property Organisation (WIPO), and is a signatory to Conventions such as the Paris Convention for the protection of Industrial Property and the Berne Convention on Copyright;
• South Africa is also a member of the South African Customs Union (SACU) and more recently joined the Southern African Development Community (SADC);
• South Africa is a member of World Intellectual Property Organisation (WIPO);
• South Africa’s adherence to Intellectual Property conventions is important for its success as a producer and exporter of IT goods and services; and
• South Africa is not a member of the Information Technology Agreement (ITA) that was established in 1996 but observes developments.

The main source of monopolistic control has traditionally been the telecommunication sector in South Africa. Steps have been taken to transform the once- monopolistic telecommunications sector. The Baseline Studies lists some of these milestones such as:

• The granting of a five-year (extendable to six years) period of exclusivity to Telkom for the provision of public telephone in 1997;
• The subsequent partial privatisation of Telkom in 1997, with the introduction of two equity partners into Telkom; and
• The licensing of a second fixed-line operators in 2001 or 2002.
   

While South Africa’s is experiencing a high unemployment rate, the labour market is finding it difficult to supply skilled ICT workers to meet the rising demand. The Human Resources Research Council (HSRC), states that there is a chronic shortage of highly skilled human resources in various segments of the market. The following reasons were provided in the Baseline Studies:

• Supply – demand issues, lack of coordination between the education system and the labour market;
• Public sector unable to compete with private sector salaries;
• Migration due to the brain drain – better opportunities in other countries;
• The Brain Drain is also forecasted to get worse;
• Shortage of workers with between five and eight years experience; and
• The overall demand for South African Professional, semi-professional and technical personnel is expected to grow by 15% over the period 1998 to 2003.

Equity and Empowerment in the ICT sector

• The number of black companies is still relatively small, but growing. Increased visibility is needed by the Black Economic Empowerment (BEE) sector;
• In 1998, there were about 70 black majority-owned IT companies, and 65 black investment consortia investing in the IT sector; and
• Baseline Study Job Skills Scan: 775 Africans in ICT, or 13% of those surveyed.

Women in ICT

Women in ICT workshop – presented by MTA consulting and AMI – conclusions:

• Male, white dominated industry with women earning less;
• Few statistics on women in the ICT industry;
• Gender issues obscured by general black affirmative action;
• Few women in leadership positions;
• Racial divisions with emphasis on white women;
• Not enough women graduates in ICT;
• Teacher development in schools is critical to ensure future pipeline and role models form an early age; and
• Rural women have little access to ICT

This section will outline industry development models in other countries from which South Africa can extract useful approaches in developing its own strategy. The countries to be examined are Canada, Ireland, Australia, India and Singapore. Listed below are the government departments, organisations and associations that have been instrumental in the development of the ICT sector in these countries.

Canada

Canada has developed a vibrant ICT sector through the co-operation of private industry and government. Even though this development has occurred in the shadow of the US it has been very successful. The success has not only been at a National level, but several provinces have also experienced success in developing and implementing an ICT sector strategy (e.g. Newfoundland and New Brunswick). Canada has adopted a number of initiatives to maintain sustainability of its information and communications technology initiatives. Canadian federal and provincial governments have adopted a number of programs and private-public partnership approaches.

The Canadian government has been involved in a number of initiatives to develop the ICT sector in Canada. In 1998, the Electronic Commerce Task Force was created to serve as a focal point and catalyst for the development of a comprehensive policy, regulatory, and legal framework, and to promote the growth and use of electronic commerce in Canada. The "task force" approach was chosen for the following key reasons:

The mandate of the Electronic Commerce Task Force includes three key elements:

1. The development of a national strategy on electronic commerce;
2. The promotion of electronic commerce in Canadian business; and
3. The participation in the development of a global framework for electronic commerce.

The government has also been involved in getting government on-line with the IM/IT infrastructure project.

Ireland

Prior to the economic recovery that Ireland has experienced, principally driven by Information Technology, there were many parallels to the issues faced by SA (high unemployment, emigration of the educated class, high interest rates, strong labour unions, a significant dependence on agriculture or basic industry).

The Irish approach has been to drive ICT from the top, through the Prime Ministers office, by including it as a government priority. It is closely linked to the social contract, which is a broad national initiative that is credited with being the key factor driving Irish success over the last decade. Negotiations are currently underway to put a fifth programme in place. The ICT sector is only a part, albeit an important part, of this agenda largely driven by the policy and advisory board for industrial development (Forfas) and Industrial Development Agency (IDA) Ireland. ICT was from the start firmly entrenched in the national agenda - something that SAITIS would like to achieve, although it is not explicitly stated as such in the LFM.

ICT had been a part of the national agenda since the 1960s but little progress appears to have been made until 1987 when they faced an economic crisis and had a change of government. At that time, the social partners had reached an agreement and signed a social contract. Between 1987 and 1999, the total number of jobs increased from 1.1M to 1.4M, most of them in the last 5 years. Some of the factors contributing to the success were:

• heavy focus on education going back to the 1960s. By 1987, Ireland had a large potential workforce to draw on;
• advanced telecom infrastructure;
• favourable corporate tax environment and government grants, especially for the export of IT goods and services; and
• significant government and MNE investment.

The Prime Minister's Department - Taoiseach's Department – oversees the partnership process. The partnership process is managed centrally through Taoiseach's Department, which runs the Central Review Committee that monitors the implementation of the programme. This committee is comprised of all of the partners to the agreement.

The dynamic nature of the sector is driven in part by the objective of the Irish Government (GOI) to position Ireland as a key player in the Information Age. Recent development include an $80 million telecoms/e-commerce investment project which will see Ireland hook up with the Global Crossing International broadband telecoms network so as to provide Ireland with a high-speed, high-capacity telecommunications link direct to the United States and 24 European cities.

The Irish computer hardware market has average annual growth rates of 2 percent – 4 percent. In 2000, the Irish computer hardware market should exceed $1.2 billion. Software is one of Irelands’s fastest growing business sectors with growth being about 15 % every two years. In 2000, the Irish software market should exceed $800 million. The Irish telecommunications sector has undergone significant change over the past three years as the Irish government implemented the EU’s liberalization agenda. Since December 1998, the sector has been fully liberalized and there is a strong competitive presence in the market with several service providers competing for market share. Ireland is currently experienced migration for the first time in ….X years due to the development of the ICT sector.

Australia

Australia has recently developed a set of strategies to enable it to take advantage of the opportunities presented by the global information economy. The Government of Australia has also been active in pursuing gender equality in its social industrial and economic policies. Choice and flexibility within the framework of minimum standards has delivered beneficial outcomes for women in the Australian labour market. The National Office for the Information Economy has published a study on Skills Shortages in Australia’s IT&T Industries, which was a collaborative effort among four departments.

In 1997, the Government of Australia established the National Office for the Information Economy to help guide Australia’s transition to the information economy. Since that time, the government has published its Strategic Framework for the Information Economy with extensive consultation with industry, business and community groups, government departments state and local governments. It has also undertaken a number of projects to begin implementing this strategy.

The Government of Australia has begun to address eight priority areas:

• Overcoming impediments to the supply side of the on-line economy.
• Encouraging access and equity.
• Establishing the government as a model user.
• Improving the intellectual property for major areas of the Australian services sector to build wealth-creating online industries.
• Developing the skills of companies and individuals to benefit from the IT infrastructure.
• Overcoming impediments to the demand side of the online economy.
• Co-ordinating Australia’s policies and representation internationally.

Australia is a leader in computing and communications innovation especially in telecommunications and network software, systems and performance management, software tools, knowledge based tools, imaging systems and GIS, as well as software applications for a number of vertical markets. Australia’s ICT industry is recognized as one of the most innovative and dynamic sectors of the Australian economy. Australia has many economic advantages. The country has moderate business costs, supportive government programs, excellent infrastructure, high quality education systems, a strong scientific base, and low development costs. Australia is the largest market after Japan for IT&T goods and services in the Asia-Pacific region. The ICT domestic market is over $33 billion dollars (1997), generates $3.4 billion in exports and over $10 billion in imports. Australia invests over $1 billion annually in ICT research and development. Australians are quick to adopt new technologies: Australians per person uptake of domain name registration is in the top 3 countries in the world. Over 6 million Australians own a mobile phone, with as many as 3 million new subscribers expected to add to this market over the next 5 years. Over 1 million households had home Internet access, with over 2.5 million houses using a computer. Almost all Australian businesses (99%) employing over 100 or more people, utilize computers.

India

India has many similarities with South Africa – it is a country in transition, largely rural and with similar infrastructure issues. In developing its ICT sector, India made a number of decisions that could provide excellent lessons learned for South Africa. They attempted to use telecommunications deregulation/competition to stimulate local sources of supply but did not help ensure that their Telco was competitive. On developing a software industry, they have been very successful at providing contracted development services, based on low cost labour, but this is not generally viewed as a sustainable model.

The delicensing of the entire electronics industry, with the exception of aerospace and defence electronics and liberalisation in foreign investment and Export - Import policies has resulted in new investments, restructuring of existing activities, diversification of the product range and an intensely competitive environment. All the renowned global brands have either established production facilities in the country or are present in the market through technical/financial collaborations, thus giving consumer a wider choice in terms of product features, technology quality and competitive prices.

The Government of India is taking steps to make India a Global Information Technology Superpower and a front-runner in the age of Information Revolution. The Government has accepted recommendations of the National Task Force on Information Technology (IT) and Software Development and has announced major fiscal benefits to the Information Technology sector. The Government has also recommended that each Ministry/Department allocate 2-3 per cent of its Budget on to IT promotion. This is a positive step for development of the domestic software industry, and a move towards Electronic Governance. The software industry has emerged as one of the fastest growing sectors in the economy with a likely turnover of US$ 4 billion and exports of US$ 2.6 billion during 1998-99.

To maintain a comparative advantage in skilled manpower required for software development, the government has initiated number of development programmes for manpower, quality up-gradation, stimulation of software engineering and research.

The National Task Force on Information Technology and Software Development has constituted a Panel and has prepared an Action Plan for Information Technology (IT) Hardware Industry, along with Policy instruments to make India a major IT power with an export target of $ 10 billion for development, manufacture and exports by the year 2008.

Singapore

The Singapore experience is a model of very proactive government strategy with the appointment of the Committee on National Computerisation under the leadership of a minister.The government is drawing up a 10 year masterplan, ICT21, to position Singapore in the new electronic world as a global information and communication technology ICT capital. Its vision is to make Singapore into a global ICT capital with a thriving and prosperous Net economy by the year 2010.

The deployment of Singapore One , a highly sophisticated ATM broadband based network, Singapore has been able to connect nearly every school, home and business. Singapore One – (One Network for Everyone ) is government funded and controlled. Launched in 1996, the S-One project is designed to create an advanced nation-wide information infrastructure linking computers in every home, office, factory and school by 2007.

Singapore One is available to 99% of the country’s population. By 2001, the government plans to offer most public services over the Net. Singapore’s schools are also putting the S-ONE network to good use. The government’s education initiative aims to have 30% of the national curriculum delivered online within three years, with one computer for every two students in every school.

Recent estimates put the number of personal computers at roughly 1.2 million the country’s three Internet service providers have a subscriber list totalling nearly 700,000 out of a population of 3.8 million.

India and Singapore currently have a Memorandum of Understanding, institutionalising a framework for cooperation and collaboration in the Information Technology sector. The MoU will establish a task force on IT to focus primarily on high technology activities in the IT sector.

The scope of the projects to be examined by the task force will be on Electronic Commerce, Electronic Government, Information Security, Human Resource Development, Research, Design and Development, and Exploring third country markets particularly of Southeast Asian countries. In order to implement the scope of cooperation, the task force shall identify programmes for the purpose of exploring and supporting research needs in the fields of innovation, incubation, venture financing and infrastructure development for ICT. The task force will promote developing skills through exchange programmes in both countries, through joint sponsorship of conferences, training programmes and seminars in the field of Information Communications Technology. A key issue in promoting these programs will be to encourage entrepreneurs in Singapore and India to foster incubation of start-ups.