March 15, 2021
South Africa's economic recovery and what it means for IT spending
By Steve Briggs, CCO at SEACOM
After many months of lockdowns, slowed markets and economic downturn, South Africa is on the road to recovery amid a successful vaccine rollout. The heartbreaking loss of lives and financial ruin caused by the pandemic are beyond anything we could have imagined. Although there is still a long road to recovery, the economy appears to be making good progress.
South Africa’s gross domestic product (GDP) is expected to grow by 3.3% during the 2021 financial year. The country has managed to pull itself away from a fiscal inferno and many businesses are now seeing signs of green shoots; new life and opportunities that signal the start of a full recovery.
This process will have many implications for companies, their goals and their future budgets. Specifically, information technology (IT) spending will likely increase as businesses move to a more tech-savvy model that incorporates remote working, online video conferencing and better networking solutions.
How the pandemic affected IT spending
At the start of 2020, many companies were forced to halt their growth strategies and adopt a more cautious approach of maintaining existing systems and improving operational efficiencies. The aim became survival through preserving cash reserves. The resulting economic downturn and uncertainty placed heavy constraints on budgets, which led to lay-offs and forced closures.
Those companies that managed to weather the storm were forced to implement strict cost-cutting measures and find ways to extract the most value from existing processes. For others, the pandemic resulted in accelerated digital transformation as they had to facilitate remote working and cloud migration. Either way, existing IT budgets were refined in order to direct some cash to more pressing business requirements.
It became clear that most businesses need to plan for uncertain times and become better at dealing with global disasters. While cautious optimism was a good approach to take, the pandemic showed businesses that anything can happen, which will affect significant business decisions in the long run.
Now that the economy is experiencing growth, businesses need to consider the opportunity costs of delaying investments in IT transformation and digital innovation. There has been a massive boom in online activity recently. According to McKinsey, Covid-19 has accelerated the e-commerce industry; allowing it to reach 10 years’ worth of growth in just three months.
More consumers and businesses are purchasing online, which is why the user experience on websites and e-commerce stores has become a major focus for many companies. Targeted marketing initiatives through online platforms are also vital for the success of sales and market share.
IT spending is on the rise
This trend is only increasing as customers search for products and services online. Investment in reliable digital infrastructure should now be a priority for companies. Businesses that restrict their IT spending should seriously consider increasing these budgets.
While Gartner predicted that IT spending would decline by 8% in 2020, it now forecasts that worldwide spending on IT solutions will grow by over 6%, with cloud computing, core business applications, security and customer experience at the forefront. Tech stocks are also expected to increase by 25% over the next year, spurred on by the growth of economies across the globe.
In South Africa, consumer spending statistics show that now is a great time for businesses to accelerate IT investments. In April 2020, consumer spending plunged by 60% but then normalised to just 2.5% lower, in August that year, than compared to August 2019. South Africa’s economic recovery has been better than expected and, a recent study has revealed that half the jobs lost during hard lockdowns have been reinstated.
Now is the time to innovate
Despite the economic and social devastation caused by the pandemic, the disaster has also given companies the opportunity to fast-track their digital transformation goals. As online consumer spending increases, companies need to invest in innovation now. Tech hubs, start-ups and data centres are beginning to spring up across the African continent. This is fuelling a digital growth revolution that brings numerous advantages to businesses that make the investment.
Businesses should not only focus on repairing operations, but also to shift towards reinventing digital platforms that enable better consumer and business-to-business (B2B) interactions. This starts with investing in IT projects that allow companies to embrace their digital future. For more information or to get a quote for our IT infrastructure solutions, email us at marketing@seacom.com or leave us a message.
SEACOM owns Africa’s most extensive network of information and communications technology (ICT) infrastructure, including subsea cables and secure internet connections. We offer a diverse range of flexible, scalable and high-quality solutions for businesses that meet world-class standards for connectivity.
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