South Africa as a Emerging destination for IT & Technology adoption has an IT spending of $ 10.8 Bn and the YoY growth expected in 2012-13 stands at 9%.

1. South Africa Country and IT
Market Report (Summary)
Global Market Expansion Advisory
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Zinnov Management Consulting

2. Table of Contents
Summary
Macroeconomic Environment
Infrastructure Overview
Vertical Insights
IT Market Landscape
Zinnov Point Of View
2

3. Table of Contents
More than
Summary
~ 18 Mn strong Labour force
~ 5.5 Mn Youth
~ 536K SMEs
62 million mobile subscribers
Lead in Natural Gas & Palm Oil exports
Increasing Consumption & Disposable incomes
3

4. Summary - Macroeconomic Environment
$
GDP 2012-16
5.4% CAGR
41% Debt/GDP
ratio
Driven by Domestic Demand and
Government spending; high income
Neutral
inequality
High level of subsidies; govt. leveraging
debt for infrastructure, wage increases,
Negative
etc.
25.3 Median
18 million labour force; Low labor
Age
participation rates
25%
High unemployment rates; faces labour
Unemployment
problems owing to weak public education
Neutral
Negative
and restrictive labour laws
4

5. Summary - Vertical Insights
(1/2)
623K car sales; 9.2%
YoY growth
production expected to increase
$ 72 Bn sales; 4.8%
Foreign investment allowed in 2011; Walmart
YoY growth
entered South Africa by acquiring a local player
Contributes 3% to the
Largest Coal reserves in Africa is ~3.5% of global
country’s GDP
Automotive
Exports small and medium car to rest of Africa;
coal reserves; high rates of electrification
Positive
Positive
Retail
Neutral
Energy/
Power
34.7 Mn passenger
travel in 2011; 3% YoY
Aviation
growth
3 International Airports & 7 Domestic Airports cater
to the aviation sector; low levels of investments
$ 470 Bn assets; 10.7%
Low interest driving Loans growth; High Non-
YoY growth
Performing Assets – 5.7%
Positive
Neutral
Banking
Figures for 2012 unless quoted separately; YoY growth for 2011-12
5

6. Summary - Vertical Insights
(2/2)
$ 3.6 billion budget
allocated for healthcare
Healthcare
9% YoY growth
expected 2012-13
Government related projects driving PC sales;
Low growth of economy affecting PC adoption
(62%) High level of
cost housing plans by the government driving
real estate industry
the growth
Mobile penetration ratio
~62 Million mobile subscribers; 33rd largest
~ 127%
Facebook users in the world
~170K graduates; ~48K
$16.7 billion to be invested in 4 years. Low
Teacher-Pupil ratio of 1:30 in 2011.
Positive
Retail industry, Commercial complexes & low
urbanization to drive
Real-Estate
Neutral
services
$ 10.8 Bn IT spending;
IT/ITeS
Low Doctor-Population ratio
Positive
Positive
Telecom
engineers annually
Positive
Education
Figures for 2012 unless quoted separately; YoY growth for 2011-12
6

7. Summary – IT Market Landscape
Total Domestic
IT Market
PC Installed
Base
Internet Users
Mobile
Subscribers
Smartphone
Users
Over ZAR 96.8
Billion
Over 13 Million
Over 8.5 Million
Hardware (45%), IT Services
(36%), Software (19%)
Over 2.5 Million units shipped in
2012
~3.5 Million broadband
connections
Over 62 Million
Over 10 Million
Figures for 2012 unless quoted separately; YoY growth for 2011-12
Mobile penetration rate of
~127%
Accounts for 20% of total mobile
subscribers
7

8. Basic Facts & Figures
Johannesburg:
Largest and the most
populated city in the country
and is a source of a large
scale gold and diamond
trade
Constitutional democracy with
an executive president elected
by parliament
Fiscal Year - March 1 to
February 28
Zulu, Xhosa, Afrikaans and
English
South African rand (sign: R;
code: ZAR)
Christian (74%), Traditional
(15%), Rest Other (11%)
Source: Philippines Government
Cape Town:
2nd most populated city in
the country and also the
most popular tourist
destination
Durban:
3rd largest city in the
country and has the
busiest port in all of
South Africa
8

9. Table of Contents
Summary
Macroeconomic Environment
GDP Forecasts
Financial Performance
Governance scores
Demographics details
Infrastructure Overview
Sector Overview
IT Market Landscape
Zinnov Point Of View
9

10. Table of Contents
Summary
Macroeconomic Environment
Infrastructure Overview
Sector Overview
IT Market Landscape
Zinnov Point Of View
10

11. Automotive Sector-Overview
Automobile Sales
6.8% GDP contribution by
Automotive Sector in 2011
6,23,914
5,71,415
9.2%
Growth
Automobile Industry valued at $19.6 billion in
2012; employing ~ 300K
26th Largest producer of cars in 2012; ~540,000
cars were manufactured
2011
2012
Automobile Sales by Segments,
2012
Over 51% of cars are exported - 277,844 vehicles
exported in 2012 valued at USD 5.6 billion
Small & medium cars form over 3/4th of the
4,39,997
1,56,170
exports (77%, 214,261 cars)
CAGR of
10.8%
Passenger
Cars
2020
2012
0.53
million
Units
1.2
million
Units
17,931
9,816
LCV
Heavy
Vehicles
MCV
Market Share of Major Players in
South Africa, 2012
Toyota
Volkswagen
AMH
(local
General
Motors
player)
19.2%
18.1%
13%
11.9%
Projected Production of Vehicles
Source: NAAMSA National Association of Automobile Manufacturers, Department of statistics, South Africa, Ministry of Transport, South Africa, OICA
11

12. Automotive Sector- Growth Drivers
• 20% of import tariffs on
components made duty
free for manufacturers
with production capacity
>50,000 units
• Reduction in import tariff
Local
up to 25% for built up
vehicles for
Assembly
manufacturing
Allowance for
Domestic
Manufacturers
• Sub- Saharan Region
accounted for 19% of
the total exports in 2012
• Emerging market such
as Botswana, Lesotho,
Namibia & Swaziland are
new export markets
Rising
Demand of
cars in SubSaharan
Region
• 262,156 cars domestically
sold in 2012
• Domestic car sales
increased by 9% from
Strong
demand
from
Domestic
Market
Rising
demand for
car rental
services
2011
• Rising demand from
international tourists for car
rental services
• International tourist arrivals
increased to 12.5 million in
2011 from 11.6 million in
2010
• Car rental fleet was ~65,000,
generating a revenue of USD
40.8 million in 2012
Source: NAAMSA National Association of Automobile Manufacturers, Department of statistics, South Africa, Ministry of Transport, South Africa
12

13. Automotive Sector- Inhibitors
• 59,097 cars were stolen in 2011
accounting to 10.3% of total new
• Average time of delivery takes 26
days through sea
High Car
Theft rate
car sales
• Major ports in Europe are located
at ~5,200 -5,600 Nautical miles
Geographical
distance
from Major
ports
• Steady growth in the used car market
• 5.9 million used cars sold in 2011
increasing at 6.6% from 5.5 million
unit sales in 2010
Inhibitors
New car
sales may be
impacted by
Pre-owned
car sales
Lack of
skilled labor
• Lack of skilled labor in R&D for
automobile industry
Source: NAAMSA National Association of Automobile Manufacturers, Department of statistics, South Africa, Ministry of Transport, South Africa, BRIC summit report
13

14. Automotive Sector- Emerging Trends
Rising demand for car leasing
services
~100,000 cars were leased in
2012 with a growth of 2.1% in
2011
Emerging trends in Automotive
industry
Increase in Franchise Distribution
Rising Personal Disposable
Models
Income
Mahindra & Kia Motors
establishing sales outlets through
franchisees
Average monthly income
estimated to increase from $
2,400 in 2011 to $3,300 by 2015
14

15. Retail Sector- Overview
13.2% GDP contribution by
sector in 2011
Retail trade dominated by Apparel & textile ~22% &
FDI in Retail implemented in
2011
Wal-Mart acquires 51% in
Massmart for $1 Billion
Retail Industry Size- USD Billion
72.2
Food & Beverages ~11% in 2012
Retail sector concentrated in Johannesburg,
68.9
Pretoria, Cape Town & tourism oriented cities
Mass grocery retail to contribute $13.9 Billon
sales in 2013
2011
4.8%
Growth
2012
2016
2012
$ 72.2
Billion
FDI participation limited to 51% stake in the local
retail chains by international retailers
$ 97.5
Billion
58% of internet users prefer online shopping in
2012 compared to 53% in 2010
7.8%
Growth
Mass grocery retail sales growth forecast
Dominant Players: Shoprite Holdings,
Pick n Pay,Wal-Mart, Spar group & Metcash
Trading
15

16. Retail Industry- Growth Drivers
1.
Rising Middle
Classconsequent
demand for retail
products
• Average household income
was $2,400 in 2011.
• ~27% of household
expenditure spent on food &
beverages
2.
• Government investing $ 352
Increase in
Investment in
Infrastructure
3.
FDI in Retail
Sector
billion from 2012-2020 on
• 11 million households are
estimated to have annual
income of $10,000 by 2016
•
•
infrastructure projects
• Wal-Mart entered domestic
retail in 2011
• Wart-Mart acquired 51%
stake in Massmart for USD
1.8 billion
•
•
Improvement in Logistics
sector to reduce losses
Warehouses with an area ~
80,000m2 to 145,000m2
built in Pretoria, Cape
Town, Centurion & Durban
Retail sector is expected to
consolidate in 2-3 years
Tesco & Carrefour entering
the market through
mergers & acquisitions
16

17. Retail Industry - Inhibitors
Weak
currency
exchange
rate &
Inflation
• Wage rates of labor
is ~$ 200- 600p.m.
• Labor consistently
engaged in strikes
Low Labor
Wage
Rates
• Apparel & footwear
manufacturing companies
shifting to Lesotho &
Swaziland due to labor
issues
Source: PwC
•Currency volatility leading to high cost
of import & export of retail goods
•Rising Petrol & electricity resulting in
high inflation of 5.3% & operational
cost
Inhibitors
Paucity in
retail
infrastructure
• Lack of logistics leading to high
operational costs
• Domestic retailers have started operations
in Ghana, Congo, Nigeria & others
17

18. Retail Industry- Emerging Trends
International Brands
opening commercial stores
•
International Brands GAP
& Zara opening stores in
Sandton in 2012
Trends
Expansion of Retail
Network
•
•
Domestic retailers opening
stores in sub-urban areas
Woolworth is opening a
store of 3,200m2 near
Johannesburg
Emerging Ecommerce market
• Low fixed broadband
penetration of 1.9%
• 8.5 million internet users
in 2011
18

19. Banking Industry-Overview
Banking System Rated 2nd by
World Economic Forum for
“Soundness of Banks” in 2012
Loans & Advances (USD Billion)
264
227
16.3 %
Growth
Repo rate of South Africa Reserve Bank was 5%
in 2012
2010
2011
Non Performing Assets % of loan
Absa, FNB, Standard Bank, Nedbank & Capitec
are the major banks
Total Banks Deposits increased by
6.5% in 2012
Non Performing Assets
Non Performing Assets as % of Loans
20
15
13
10
5.7%
5.8%
0
2010
Total Assets (USD Billion)
424.7
2010
Source: South Africa Reserve Bank
470.1
2011
External Debt (USD Billion)
42.1
45.2
2009
2010
50.9
10.7%
Growth
2011
2011
19

20. Banking Industry- Drivers
~120,000 students availed
education loans in 2012
• Adopting global banking
norms giving a positive
outlook to foreign investors
Education loans distributed
were valued at $400 million
in 2012
5 major banks are
expanding to rural areas.
Absa Bank plans 300 rural
branches by 2014
Demand for
loans from
Education
sector
Implementation
of BASEL 3
norms
Huge SmallExpansion of
Medium
Banking Shortage of
enterprise
Services & teaching
staff businesses
Network
• The implementation of
BASEL norms shall be
followed till 2018
~1 Million SMB’s in the
country indicates good
market growth potential
Micro-insurance bill passed
to promote low cost
insurance products for low
income group people
Source: South Africa Reserve Bank
20

21. Banking Industry- Inhibitors
Inhibitors
High poverty &
unemployment rates
• Poverty rate was 24% in 2011.
• High poverty rate leading to
untimely repayment of loans
• High unemployment rate
resulting in low credit
borrowings from banks
• Lack of skilled workforce due to
low literacy rate of 67%
Source: South Africa Reserve Bank
Weak Currency
• Volatile fluctuation in currency
exchange rate having impact on
FDI & FII
Operational Challenge
•High electricity rate &
infrastructure constraint for
starting new branches
•Decline in mining commodities of
South Africa due to slow global
economic growth
•Bad debt expenses increased to
36% in 2012
21

22. Education Sector-Overview
7% of GDP expenditure
on Education
Schools
25,850
25,851
25,826
2010
2011
2012
Adult Literacy rate ~77%
Universities Classification
11
General
Universities
6
Technical
Universities
6
Comprehensive
Institutions
Government Schools outnumber private
schools with a share of ~94% in 2012
Teachers
School Enrolments
in Million
12.26
12.28
12.43
2010
2011
2012
4,18,109
4,20,608
4,25,167
2010
2011
2012
~15.8 million i.e. 3.2% of population is
under 15 years
Low Teacher-Student ratio of 1:30
compared to global average of 1:24 in
2011
Source: Education Ministry, Department of Basic Education, Council of Higher Education
22

23. Education Sector- Growth Drivers
• 500 Maths, Science & Computer
labs equipped with ICT till 2012
• Government distributing Tablets
to promote ICT in education
• 600 more labs to be
equipped with ICT
infrastructure
• International
Accreditation for courses
at school level
•
•
•
Government promoting
education through low
interest loans
Interest rate for
repayment is 5.2%
Education loan is
provided without
guarantee or surety
Implementation
of ICT in
Education
Increase
Lack of
College
educational
Enrollments
institutions
Construction
Government
Shortage of
of New
support for teaching
Colleges
financing
staff
education
Source: Education Ministry, Department of Basic Education, Council of Higher Education
• Government initiating
steps to enroll 1 million
students by 2014
• Construction of 2 new
universities will begin in
2014
• 15,000 students
enrollment capacity being
planned for Mpumalanga
• University with a capacity
of 5,000 students at
Kimberly
23

24. Education Sector - Inhibitors
Weak
Lack of
currency
Educational
exchange
Infrastructure
in rate &
Schools
Inflation
• 40% of the students
dropped out in 1st year
of enrollment in
universities
• High cost of education
leading to improper
payments
•92%of the schools don’t have libraries &
laboratories in their premises
•Lack of skilled teachers to impart
education
•11 official languages leads to challenge
in translation of subjects
Inhibitors
High
Dropout
rates
• Low penetration of
education loans
• 120,000 students out of
735,000 availed education
loans
Source: Education Ministry, Department of Basic Education, Council of Higher Education
Low
Participation
of Private
institutions
• Only 114 private institutions provided
higher education in 2011
• 6.1% of the schools were privately owned
24

25. Real Estate - Market Overview
South Africa Property market
delivered 15.2% Return on
Investment in 2012
21.4
23.1
Buildings Constructed in
Million Sq. Ft.
2011
2012
0.8 1.1
$89.5 billion was the outstanding residential
mortgage balance in 2012
Office Market: Rise in enterprises
resulting in demand for office space in
major business hubs
Residential
buildings
0.6 0.5
Office & Banking
Space
Retail Space
Real Estate Value, 2011
% Share
15.9
55.9%
Office
7.4
26.0%
Industrial
Industrial Property: Moderate growth due
to slow growth in international economic
growth. Growth observed in major ports &
cities
Value
($ Billion)
Retail
Retail: Foreign retailers establishing
themselves in new infrastructure in 2013
Nature of
Property
3.6
12.6%
Other
1.6
5.5%
Total
28.5
100%
25

26. Real Estate - Growth Drivers
• People are moving to the
urban areas due to better job
opportunities
People moving
to urban areas
• Foreign nationals can purchase
immovable property without
restrictions
• The property purchased needs
to be endorsed as nonresident property
Nominal
interest rates
leading to
property
purchase
• Low interest rates to
support purchase of
property
• Outstanding mortgage
balance increased to $89.5
billion in 2012
Ease in property
purchase by
foreigners
26

27. Real Estate - Inhibitors
Weak
Scams in Real
currency
estate market
exchange
rate &
Inflation
•Bank transactions are being hacked to
transfer profits earned by the seller
•32 cases were registered till March 2013
• ~25% of unemployed people
makes the repayment of loans a
tough task
High
unemployment
rate leading to
less repayment
Inhibitors
High
commission
rates for real
estate agents
• Commissions earned by real estate agents
is in the range of 7%-20% which
increases the price of property
27

28. Energy Market - Overview
3% contribution to GDP# in 2011
Expenditure on New Energy
Infrastructure Projects (USD Million)
327.4
Largest Coal reserves in Africa 30,156 million tons
accounting for 3.5% of global coal reserves in 2011
Nuclear consumption was 12.7 Tw (Tera Watt
313.3
294.5
hours) & Hydroelectricity consumption was 2 Tw in
2011
2009
19 projects given to private players for clean
2010
2011
energy generation in 2012
Electricity Consumption & Import (Giga
Watt Hours)
Electrification Rate (%)
13.5
Houselholds
13.0
Electrification rate
76.5%
75.8%
74.9%
11.5
13.2
75%
74%
2011
2,22,710
76%
75%
11.0
2010
2,22,674
76%
12.9
13.0
2,13,881
77%
12.5
12.0
77%
2012
Source: Energy Department, South Africa, Statistics South Africa
14,304
2009
14,203
2010
13,901
2011
Note: # GDP at Constant 2005 prices
28

29. Energy Market - Growth Drivers
Use of
Renewable
Source of
Energy
Government
initiative to
increase PPP
projects
Electrification
network
expansion
Government installing Solar
water heaters to reduce
dependence on conventional
sources of power
Government plans to install 1
million solar water heaters by
2014
$11 million being invested
through public private
partnership for renewable
energy projects
Association with Netherlands for
starting renewable energy
projects through Public-Private
investments
Integrated National
Electrification Program (INEP)
to connect the underserved
rural areas
$352 million allotted for
electrification in rural areas
107,000 new grid connections
completed till March,2012
Source: Energy Department, South Africa, Statistics South Africa
29

30. Energy Market - Trends
• ABSA Capital South Africa in association
with Africa Development Bank & World
Bank will finance $400 million for
generating 2,000 MW
• Construction of wind farms to generate
10 Gigawatts energy by 2020
Local firms investing
overseas
Developing wind energy
Trends
Expansion in the
electrification of
households
• Government plans to attain 85%
electrification rate in households by
2016
Source: Energy Department, South Africa, Statistics South Africa
Increase in Private
sector participation in
Clean Energy Program
• Eskom, Nersa, NESCA, CEF Group &
other energy producers are actively
involved in clean energy management
to provide green energy
• Technology from 23 countries being
used for the program implementation
30

31. Healthcare/Pharmaceutical Industry - Overview
~11% of Total Government Budget
allocated for Public Health Services
Healthcare
Expenditure (ZAR
Billion)
Pharmaceutical
Expenditure (ZAR
Billion)
295.3
Low Doctor-Population ratio of ~0.77 per 1,000 ,
2012
271.4
34.0
30.5
165,371 registered healthcare personnel employed
$33.07
billion
$32.86
billion
2012
2013
$3.84
billion
$3.78
billion
by private & public sectors
Low Hospital beds per 1,000 people ratio of 28
compared to global average of 30 in 2011
2012
2013
Healthcare expenditure to increase by 11.7% &
452 public & private hospitals operate in provinces
Pharmaceutical expenditure by 8.8% in local
currency
31

32. Healthcare/Pharmaceutical Industry - Drivers
Growth
Drivers
Antiretroviral drugs reducing
death rate due to HIV/AIDS
International Tie-ups for
increasing healthcare
personnel
Government Expenditure to
improve healthcare services
• Public distribution of ARV drugs
reduced AIDS related deaths
from 257,000 in 2005 to
133,000 in 2010
• International association with
Cuba, Iran & Tunisia for training
doctors
• Doctors from Cuba being
recruited for healthcare services
• ~1.9 million patients are using
ARV drugs for treatment
• HIV infected babies due to
infected mothers declined to
2.7% in 2011 compared to
8.5% in 2008
• $ 11 million for the
construction of 5 hospitals
under public private
partnership
• ~$75.8 million for HIV & AIDS
prevention programs
• Government inviting foreign
doctors to register for
healthcare services
• 3,773 healthcare professionals
registered in 2012
• $18 million for upgrading
nursing colleges
• $1.2 billion allocated for
development of provincial
healthcare services
32

33. Healthcare/Pharmaceutical Industry - Inhibitors
•
•
•
Low Medical
Insurance
Penetration
Lack of ambulances &
intensive care units in
rural areas
Shortage in essential
life saving drugs in
rural areas
Underserved
Rural areas
Only 8 million people are
covered by health
insurance/medial schemes of
the government
High rate of
Sexual Crimes
Inhibitors
•
•
Low doctor-population
ratio of 0.77 per 1000
people
~Only 1,200 medical
students graduate
annually
Source: Department of Health South Africa
Lack of
Healthcare
Personnel
Low use of
Contraceptive
measures
•
• High rate of
sexually
offensive crimes
• ~2.2 million
rape cases were
recorded in 2011
~65% of the people
avoided the use of
protective measures
such as contraceptive
devices
33

34. Healthcare/Pharmaceutical Industry - Trends
Pharmaceutical Companies making applications
1
ICT
integration in
Healthcare
that offer information about drugs to doctors,
nurses & patients
Project Masiluleke provides information on
HIV/AIDS through mobile communication
2
Legislation on pharmaceutical emphasizing on
inexpensive drugs compared to branded
Increase in
Generic Drug
Market
medicines
Healthcare insurers cover expenditure on
generic drugs
Source: IDC , Frost & Sullivan, The Center for Health Market Innovations
34

35. IT/ITeS Industry - Overview
8.2% contribution by ICT sector
to the GDP
Broadband Users
Fixed Broadband Subscribers
1000000
Internet penetration was ~17% in 2011
compared to 29% in Nigeria in 2011
1.48%
800000
Only ~9% of the SME used Cloud Computing in
2011 & ~63% of SMEs had websites
400000
MTN to start Cloud Computing services to SMEs in
2013
Personal Computers vs. Laptop Sales
(Million)
5.4
5.3
2.1
5.2
2.6
2009
2010
Personal Computers
7,43,000
9,07,000
1.0%
0.5%
4,81,000
200000
0
0.0%
2009
2010
2011
In Local Currency IT sales have inc by QQ%
IT Products/Services Sales figures
ZAR Billion
38.9
43.9
2012
2013
33.134.4
3.3
$5.4
billion
2011
Laptops
1.5%
0.96%
600000
Ranked 72 for IT network readiness index
Penetration Rate
1.79%
2.0%
$5.3
billion
Hardware Sales
16.9 18.6
$2.3 $2.25
billion billion
Software Sales
$4.2
billion
$4.6
billion
IT Services
35

36. IT/ITeS Industry - Growth Drivers
E-health & mobile health
services being implemented to
improve clinical practices &
healthcare connectivity
ICT in Healthcare sector
Increase in Data
consumption in phones
Browsing on phone increased
from 33% to 41% of mobile
phone users in 2012
Mobile downloads increased
from 13% to 24 % mobile
users in 2012
Growth
Drivers
Increase in IT expenditure
by Government
departments
The IT expenditure to
increase at CAGR of 13.2%
from $523 million in 2012 to
$ 860 million in 2015
Investment in Under Sea
Cables
17,200 km West African Cable System (WACS)
linking 14 countries constructed at $ 650 million
WACS increased South Africa’s international
bandwidth capacity by 5.12 Tbps
36

37. IT/ITeS Industry - Trends
• WNS acquired Fusion Outsourcing
Services for $15 million in 2012
• Capita Inc plans to invest $55 million till
2015
• 76% of corporations & 38% of SMEs
spend ~2% of IT budget on digital
mapping
• Digital mapping increasing data security
by ~61% & productivity by ~48%
Emerging BPO Market
Rise in Digital Mapping
Emerging
Trends
Trends
Increase in ECommerce industry
• 8.5 million internet users generated
$1.6 billion in 2011 increasing by 30%
from 2010
• B2B E-commerce valued at $4.2 billion
in 2011
Shift in Internet Access
points
• Broadband penetration is ~17% due to
multiple access through tablets &
smartphones
• Wimax Launched by Neotel in Pretoria,
Cape Town, Johannesburg & Durban
37

38. IT/ITeS Industry - Inhibitors
1
Low IT
competitiveness
rank
Low competitiveness rank of 72
due to less IT infrastructure
2
~30% of the software are being
pirated having an impact on the
reseller market
Software
Piracy
3
Low Broadband
penetration
Broadband penetration ~17%
only. Broadband infrastructure
confined to urban areas
4
Unskilled Labor
Despite 77% adult literacy, lack of
technical skills leading to low
employment
38

39. Telecom Industry – Market Overview
64.3 million mobile subscribers
with a penetration of 127%
2,635 new Telecom licenses issued in FY’12
4G LTE rolled out in 2012 by Vodacom & MTN in
Johannesburg, Durban, Pretoria & Hatfield
Mobile Subscribers base Projections
2016
2011
5% CAGR
Growth
83
Million
65
Million
Implementation of fiber-optic broadband network
across the 9 provinces
Fixed Telephone Lines (Million)
Major Players- Telecom Sector
4.32
Vodacom
4.23
MTN
Cell c
33.7%
13.2%
8ta
4.13
50.9%
2009
2010
1.8%
2011
39

40. Telecom Industry - Growth Drivers/Initiatives
• Non-profit, community based
broadband schemes with low
tariff for weak sections of
society
• Enable ICT services to
physically challenged people
Community
driven schemes
for broadband
• 12,000 km national- access
fiber optic broadband network
is being built by FibreCo
Telecommunications
• Western Cape province to
connect 4,000 government
establishments & schools with
broadband network
4G/LTE
Implementation
for mobile &
non-mobile
users
National
Broadband
Policy to
improve
connectivity
• Vodacom Launches 4G
implementation in 70 small
areas of Johannesburg
• Vodacom invested $840
million to implement 4G
• MTN launches 4G/LTE at
500 sites in Durban,
Johannesburg, Pretoria &
Hatfield
• MTN plans to launch LTE
dongles for wireless device
users
• National Broadband policy
aimed to provide optic fiber
connectivity
• National Broadband network
to be implemented by 2020
• 5,000 km of fiber-optic
network cable being
constructed by Vodacom,
Neotel & MTN
40

41. Telecom Industry – Emerging Trends
Trends
High Mobile Termination
Rate(MTR) leading to
cheaper international calls
CellC introduced 99cents
plan & added 1 million
customers in 7 weeks
Joint ventures in telecom
industry to develop next
generation broadband
services. Vodacom, Neotel
constructing fiber
broadband network
WiMAX launched by
Neotel in 4 major cities.
WiMAX enabling improved
access to remote areas
41

42. Aviation Sector contributes
2.1% to the GDP ~6.07
billion 2011
3 International Airports & 7 Domestic Airports
cater to the aviation sector
Millions
Aviation Sector – Market Overview
40
Passenger Movements
30
9.4
20
24.4
3%
Growth
0
Domestic Players dominate the industry with a
market share of ~62%
Aircraft Movements
84,292
2009
85,399
2010
Source: Airports Company South Africa, South Africa Times
25.1
2.9 %
Growth
10
FY'10
South African Airways was voted as the best
airlines in 2012 in Africa by Skytrax
9.7
Domestic
FY'11
International
Major Players- Aviation Sector
South African Brirish
Airways
Airways
Com Air
Mango
11.6%
7.3%
89,473
43.3%
2011
12.7%
Low Cost carriers gaining importance with new
players entering the market. Fastjet entered in
2012
42

43. Aviation Sector - Growth Drivers
Government initiative to develop &
promote air freight logistics for aviation
sector
$781,000 allocated for managing
logistics activities
• 8.3 million international tourists arrived
in 2011 increasing by 3.3% over 2010
Rise in International
Tourist Arrivals
Aviation Infrastructure
Development
Drivers
Government initiatives
to promote Jobs
• Aerospace cluster being planned at
Pretoria in association with the US
• 1,500 jobs have been created for
support services to Aerospace groups
as Denel & Aerosud
Source: Airports Company South Africa, South Africa Times
Low Cost Carrier
Airlines Expanding
routes
• Fastjet- subsidiary of Lonrho & Skywise
entering the Aviation sector
• Mango, Kulula airlines expanding
routes in intra-Africa Market`
43

44. Aviation Sector - Inhibitors
Weak
currency
Small Aviation
exchange
Network
rate &
Inflation
• Only 10 airports compared to 22
airports in Nigeria
• Remote & rural areas connected through
rail & road services only
• 1Time Airlines & Velvet Sky filed
liquidation in 2012
• South African Airlines got a $748
million bail out in 2012
Rising
operational
cost leading
to liquidation
of airlines
Inhibitors
Low
investment in
Aviation
sector leading
to slow
growth
• Only $7.4 million expenditure in aviation
incurred by the government in 2012
44

45. Table of Contents
Summary
Macroeconomic Environment
Infrastructure Overview
Vertical Insights
IT Market Landscape
Connectivity - PC, Broadband and Mobile Penetration
Social Media Penetration
IT Spending estimates and SMB status
Government ICT Plans
Zinnov Point Of View
45

46. South Africa
Positive
Positive
Strong growth oriented market and high rated in
governance indicators
Manufacturing is one of the key areas in the
economy
South Africa to
become the 20th
largest economy
in the world by
2030
Growth of economy with 6% increase in GDP for
Negative
2012; However government spending accounts for
majority of growth
Negative
Ethnic tensions may impact political and business
enviornment
46

47. Zinnov Management Consulting
For more details and complete copy of the
report, write to us at info@zinnov.com
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