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Financial Services Industry

GLOBAL CONNECTEDNESS

Accountancy SA, Nov 2007 by Pennington, Steuart

The personal computer, cell phone and the internet have radically transformed the way that people access information, shop, interact and communicate. Given our real and virtual isolation pre-1994, South Africa - and Africa as a whole - is making significant progress in joining the information superhighway, especially over the past few years.

According to Nielsen//NetRatings, a US-based internet media and market research company, the number of unique users in South Africa grew by 121% between May 2005 (1.8 million) and May 2007 (3.9 million). During the same period, page impressions grew by 129% from 91 million in May 2005 to 207 million in May 2007.

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Alex Burmaster, Internet Analyst for Nielsen//NetRatings says, "In terms of the number of people using the Internet, the most developed markets in the northern hemisphere have seen a plateauing of growth over the last year or so. In contrast, South Africa has seen phenomenal expansion - growing by around 50% in each of the last two years"

The rapid growth in the domestic IT industry can be attributed to South Africa's surging GDP growth, mild inflation, a growing middle class and lower broadband costs. However, ineffective liberalisation of the telecommunications industry has meant that broadband costs remain too high.

With the introduction of the second network operator Neotel and the stateowned broadband infrastructure company Infraco, greater competition should see an end to the Telkom monopoly and a drop in prices.

South Africa has 'long had a favourable environment for digital business,' says the Economist Intelligence Unit. Currently, South Africa ranks 37th out of 64 countries (and ahead of emerging market giants India, China, Russia and Brazil) in terms of its information technology industry competitiveness and 37th out of 115 countries in the Global Information Technology Report's Network Readiness Index for 2006, ahead of India, Italy, China, Brazil and Argentina.

The Index, produced by the World Economic Forum, measures the propensity for countries to leverage opportunities offered by IT for development and increased competitiveness.

In Africa, the high internet costs have stifled the growth of the IT sector on the continent. Consumers along the east coast of Africa are currently paying between US$200 and US$300 a month for internet access!

This is set to change. In August, the International Finance Corporation, a member of the World Bank Group, announced that it will invest in the East African Submarine Cable System, a landmark fiber-optic cable project that will connect 21 African countries to each other and the rest of the world with high-quality Internet and international communications services. The cable, known as EASSy, will run 10,000 kilometers from the continent's southern tip to the African horn, connecting South Africa, Mozambique, Madagascar, Tanzania, Kenya, Somalia, Djibouti, and Sudan.

It is expected to reduce broadband costs substantially for consumers and businesses.

The continent has been making steady progress with respect to broadband penetration, an area where the Middle East and Africa (MEA) region was recently ranked fourth of six continents - ahead of Latin America and Asia Pacific - by the Economist Intelligence Unit.

The extraordinary penetration of cell phones in Africa is also expected to drive Africa's connectedness and competitiveness. The unprecedented growth of the mobile market in this country has meant that the majority of our population has skipped the era of having a PC, a fixed-line telephone and a bank branch, and is moving straight into the mobile era - where an ever-increasing number of everyday tasks can now be done on a cell phone.

When South Africa's largest online network, 24.com, launched a new mobile platform that offers news, entertainment information, weather forecasts and email to the growing number of locals accessing the Internet via their cell phones, it cited some pretty strong evidence for the proliferation of the mobile web locally:

* BBC reported 20% of its international WAP (Wireless Application Protocol) traffic originating from South Africa;

* Opera Mini, a leading mobile browser, reports South Africa as one of its top five territories worldwide; and

* an international mobile advertising network claims over 60 million page views per month originating from South Africa.

"Cell phones are becoming a greater source of internet access, as it is becoming easier to use this mode of connection as an internet browser and the internet is opening up to wider markets (in Africa) because of it," says South African online media guru Matthew Buckland.

Buckland is certain that the already strong online landscape of South Africa will only improve as the internet becomes more accessible. "Broadband is growing and we can start to embrace rich media, making greater use of video and audio as well as spending more time on the net."

The South African online market is set to grow dramatically when domestic markets elsewhere are stagnating. With South Africa's bright young things leading the way (see examples in the IT Fast Facts box below), we are well poised to be a significant player in this dynamic, lucrative and highly competitive global industry.

Financial Services Industry

GLOBAL CONNECTEDNESS

Accountancy SA, Nov 2007 by Pennington, Steuart

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