sa sme and midmarket ict market sizing and forecast (june 2009)

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SA SME and midmarket ICT

market sizing and forecast

report

(Report Code: 1289)

Analysts: Tertia Smit, Sheldon Neilson, Penny Smith

Date: June 2009

© BMI-TechKnowledge Group, 2009 - I - June 2009

TABLE OF CONTENTS

Section Page

1. Executive summary ....................................................................................................................... 1

The telecommunications market in SA ...................................................................................... 1

The total enterprise telecommunications market spend .......................................................... 2

The SME and midmarket telecommunications spend ......................................................... 4

The IT market in SA .................................................................................................................... 5

The enterprise IT market spend ................................................................................................. 6

The SME and midmarket IT spend ....................................................................................... 7

2. Market defined .............................................................................................................................. 8

SA ICT Converged End User Programme .................................................................................... 8

Methodology .............................................................................................................................. 8

Research components.......................................................................................................... 9

Industry vertical sector segmentation ..................................................................................... 12

Number of companies by vertical sector and company size ............................................. 13

Telecoms service type categories ...................................................................................... 14

IT product and service type categories .................................................................................... 15

Market sizing and forecasting .................................................................................................. 15

Base year ............................................................................................................................ 15

IT Categories ...................................................................................................................... 17

Telecoms ............................................................................................................................ 17

Forecasting ......................................................................................................................... 17

3. SA economic overview ................................................................................................................ 19

Economic indicators ................................................................................................................. 21

Business and consumer confidence ......................................................................................... 22

Expenditure .............................................................................................................................. 23

GDP per industry sector ........................................................................................................... 24

Inflation .................................................................................................................................... 26

Interest rates ............................................................................................................................ 27

The rand exchange rate ............................................................................................................ 28

Issues ........................................................................................................................................ 28

The future ................................................................................................................................ 30

4. Overview of customer segments and vertical sector .................................................................. 32

Economically active VAT registered SME and midmarket companies ...................................... 35

Total business telecoms market analysis and forecast by customer segment. ........................ 36

© BMI-TechKnowledge Group, 2009 - II - June 2009

5. SME and midmarket telecoms market ........................................................................................ 37

SME and midmarket telecoms spend by vertical sector .......................................................... 37

SME and midmarket telecoms spend by service type ............................................................. 38

6. SME and midmarket telecoms forecast and analysis .................................................................. 41

SME and midmarket telecoms forecast analysis by service type ............................................ 41

SME and midmarket telecoms forecast analysis by customer segment .................................. 41

Overall SME and midmarket telecoms forecast analysis by customer segment ............... 41

SME and midmarket telecoms forecast analysis for fixed voice services .......................... 42

SME and midmarket telecoms forecast analysis for internet services .............................. 43

SME telecoms and midmarket forecast analysis for mobile services ................................ 44

SME and midmarket telecoms forecast analysis for other data services .......................... 45

7. Overview of customer segments in the total business IT market ............................................... 47

Total SME and midmarket IT spend by customer segment...................................................... 48

SME IT spend by service category ............................................................................................ 49

8. SME and midmarket IT forecast analysis..................................................................................... 52

SME and midmarket IT forecast analysis by service category ................................................. 52

SME and midmarket IT forecast analysis by customer segment.............................................. 53

Overall SME and midmarket IT forecast analysis by customer segment ........................... 53

SME and midmarket IT forecast analysis by customer segment and hardware spend ..... 54

SME and midmarket IT forecast analysis by customer segment and software spend....... 55

SME and midmarket IT forecast analysis by customer segment and IT services spend .... 56

© BMI-TechKnowledge Group, 2009 - III - June 2009

LIST OF TABLES

Table Page

Table 1 Overview of customer segments and definitions ........................................................................... 10

Table 2 Detailed description of industry segments by SIC code .................................................................. 12

Table 3 Detailed description of industry segments by SIC code .................................................................. 13

Table 4 Number of organisations by customer segment and vertical sector, 2008 .................................... 13

Table 5 Economic indicators for South Africa .............................................................................................. 22

Table 6 Expenditure in South Africa, 2006 forecasted to 2011 ................................................................... 23

Table 7 Percentage change in household disposable income 2004 to 2008 ............................................... 24

Table 8 Gross domestic product by industry at current prices (R million) .................................................. 25

Table 9 Growth - percentage change in GDP by industry at constant 2000 prices ..................................... 25

Table 10 Sectoral contribution to gross domestic product growth (%) ....................................................... 26

Table 11 GDP growth comparisons 2008 forecasted to 2010 ..................................................................... 29

Table 12 Number of organisations by company size and vertical sector, 2008 ........................................... 32

Table 13 Overview of SME and midmarket customer segments and definitions ........................................ 35

Table 14 Number of formal SME and midmarket organisations by customer segment and

vertical sector, 2008 ............................................................................................................................. 35

Table 15 Total business telecoms market forecast analysis, (R'000) 2008-2013 ......................................... 36

Table 16 Total SME and midmarket telecoms spend by customer segment, (R'000) 2008 ......................... 37

Table 17 SME and midmarket annual telecoms spend by vertical sector, (R'000) 2008 ............................. 38

Table 18 SME and midmarket telecoms spend by service type and customer segment,

(R'000) 2008 ......................................................................................................................................... 38

Table 19 SME and midmarket telecoms spend and forecast analysis by service type,

(R'000) 2008-2013 ................................................................................................................................ 41

Table 20 SME and midmarket total telecoms spend by customer segment, (R'000) 2008-

2013 ..................................................................................................................................................... 42

Table 21 SME and midmarket forecast analysis by customer segment and fixed voice

services spend, (R'000) 2008-2013 ...................................................................................................... 43

Table 22 SME and midmarket forecast analysis by customer segment and internet spend,

(R'000) 2008-2013 ................................................................................................................................ 43

Table 23 SME and midmarket forecast analysis by customer segment and mobile services

spend, (R'000) 2008-2013 .................................................................................................................... 44

Table 24 SME and midmarket forecast analysis by customer segment and other data

spend, (R'000) 2008-2013 .................................................................................................................... 45

Table 25 Overall spend by IT services category, (Rm) 2008 ......................................................................... 47

Table 26 Total SME and midmarket IT spend by customer segment, (Rm) 2008 ........................................ 48

Table 27 SME and midmarket IT spend by category and customer segment, (Rm) 2008 ........................... 50

© BMI-TechKnowledge Group, 2009 - IV - June 2009

Table 28 SME and midmarket IT spend p.a. and forecast analysis by service category, (Rm)

2008 ..................................................................................................................................................... 52

Table 29 SME and midmarket overall IT spend forecast analysis by customer segment,

(Rm) 2008-2013.................................................................................................................................... 53

Table 30 SME and midmarket IT hardware forecast analysis by customer segment, (Rm)

2008-2013 ............................................................................................................................................ 54

Table 31 SME and midmarket IT software forecast analysis by customer segment, (Rm)

2008-2013 ............................................................................................................................................ 55

Table 32 SME and midmarket IT services forecast analysis by customer segment, (Rm)

2008-2013 ............................................................................................................................................ 56

© BMI-TechKnowledge Group, 2009 - V - June 2009

LIST OF FIGURES

Figure Page

Figure 1 Overview of the customer segments in the total business telecoms market,

(R'000) 2008 ............................................................................................................................................1

Figure 2 Overview of the total telecoms market by service type, (R'000) 2008 ............................................2

Figure 3 Enterprise telecoms market by service type, (R'000) 2008 ..............................................................3

Figure 4 Annual telecoms spend in all service categories ,(R'000) 2008 ........................................................4

Figure 5 SME telecoms spend by service type, (R'000) 2008 .........................................................................4

Figure 6 Overview of total IT market spend, (R'000) 2008 .............................................................................6

Figure 7 Overview of total IT market spend by service category, (R'000) 2008 .............................................6

Figure 8 Overview of total enterprise IT market spend by service category, (R'000) 2008............................7

Figure 9 SME IT spend by service type (R'000) 2008 ......................................................................................7

Figure 10 SA ICT Converged End User Programme ........................................................................................8

Figure 11 BMI-T customer segmentation .......................................................................................................9

Figure 12 Percentage companies per BMI-T customer segmentation, 2008 .............................................. 10

Figure 13 Number of organisations by customer segment and vertical sector, 2008 ................................. 14

Figure 14 Movements in prime interest rates, 2003 to 2009 ...................................................................... 27

Figure 15 Distribution of organisations by vertical sector and customer segment, 2008 ........................... 33

Figure 16 Distribution of organisations by customer segment and vertical sector, 2008 ........................... 34

Figure 17 Total business telecoms market forecast, 2008-2013 ................................................................. 36

Figure 18 Overall SME and midmarket telecoms spend by customer segment, (R'000)

2008 ..................................................................................................................................................... 37

Figure 19 SME and midmarket telecoms spend by service type, 2008 ....................................................... 39

Figure 20 SME and midmarket telecoms spend by service type and customer segment,

2008 ..................................................................................................................................................... 39

Figure 21 SME and midmarket telecoms spend by organisation size and service type, 2008 .................... 40

Figure 22 Total SME and midmarket telecoms spend and forecast analysis by service type,

(R'000) 2008-2013 ................................................................................................................................ 41

Figure 23 Total SME and midmarket telecoms spend by customer segment, 2008-2013 .......................... 42

Figure 24 SME and midmarket forecast analysis by customer segment and fixed voice

spend, (R'000) 2008-2013 .................................................................................................................... 43

Figure 25 SME and midmarket forecast analysis by customer segment and internet

services spend, (Rm) 2008-2013 .......................................................................................................... 44

Figure 26 SME and midmarket forecast analysis by customer segment and mobile services

spend, (Rm) 2008-2013 ........................................................................................................................ 45

Figure 27 SME and midmarket forecast analysis by customer segment and other data

spend, (Rm) 2008-2013 ........................................................................................................................ 46

© BMI-TechKnowledge Group, 2009 - VI - June 2009

Figure 28 Overall IT spend by customer segment and IT services category, 2008 (R'000).......................... 48

Figure 29 Total SME and midmarket IT spend by customer segment, (Rm) 2008 ...................................... 49

Figure 30 SME and midmarket IT spend by service type, (R'000) 2008 ...................................................... 50

Figure 31 Total SME and midmarket IT spend by category and customer segment, (Rm)

2008 ..................................................................................................................................................... 51

Figure 32 Total SME and midmarket IT spend by customer segment and service category,

(Rm) 2008 ............................................................................................................................................. 51

Figure 33 Total SME and midmarket IT spend by service category, (Rm) 2008-2013 ................................. 52

Figure 34 SME and midmarket overall IT spend forecast analysis by customer segment,

(Rm) 2008-2013.................................................................................................................................... 54

Figure 35 SME and midmarket IT hardware forecast analysis by customer segment, (Rm)

2008-2013 ............................................................................................................................................ 55

Figure 36 SME and midmarket IT software forecast analysis by customer segment, (Rm)

2008-2013 ............................................................................................................................................ 56

Figure 37 SME and midmarket IT services forecast analysis by customer segment, (Rm)

2008-2013 ............................................................................................................................................ 57

© BMI-TechKnowledge Group, 2009 - 1 - May 10

1. EXECUTIVE SUMMARY

This SA ICT SME and midmarket market sizing and forecast report is a module of SA ICT

Converged End User Programme, where we analyse the enterprise IT and

telecommunications customer trends, size the markets and forecast the growth to 2013.

This report tracks the SME and midmarket ICT spend by customer segment, vertical sector

and product and service types and forecasts these markets over the next five years.

Telecoms spend includes fixed voice, mobile, internet and other data spend and IT spend

includes hardware, software and services spend.

The telecommunications market in SA

BMI-T estimates the total telecommunications services market (includes fixed, mobile

internet and other data, and excludes interconnection fees, wholesale services, and capex

and equipment spend) to be worth approximately R102.5 billion in 2008.

BMI-T segments the overall telecoms spending market into three categories, namely: the

Top 350 and other corporate organisations; tax registered SME and midmarket companies;

and the residential, private and informal business sector which includes non-VAT

registered businesses.

The figure below indicates the breakdown of the telecoms market into four major groups:

the two formal business categories (Top 350 and other corporate, and SME and

midmarket) and the balance of the market, which consists of the residential/private and

informal business sector. While not the focus of this report, it is worthwhile noting that the

residential sector uses both fixed line and mobile services, including a substantial semi-

formal home office sector, while the remainder of the informal sector is largely served by

means of prepaid mobile cellular services and often use internet cafes.

Figure 1 Overview of the customer segments in the total business telecoms market, (R'000) 2008

Source: BMI-T, 2010

Residential,

56,046,000 ,

55%SME and

Midmarket,

23,769,776,

23%

Corporate,

12,714,535,

12%

Top 350,

9,919,456, 10%


The residential and informal sector has the highest telecoms spend and constitutes 55% of

the total market share, whilst the SME and midmarket segment comprises of 23%, the

corporate market makes up 12% and Top 350 makes up 10% of the total market.

Figure 2 Overview of the total telecoms market by service type, (R'000) 2008

Source: BMI-T, 2010

The total enterprise telecommunications market spend

The enterprise market consists of about 638,000 companies/organisations that are tax

registered, about 22,860 contributing to the corporate sector of organisations that have

more than 200 employees and the remaining 615,078 in the SME and midmarket sector

who have from two to 200 employees.

Fixed Voice,

24,301,000 ,

24%

Internet,

5,299,768 , 5%

Mobile,

65,008,000 ,

63%

Other Data,

7,841,000 , 8%


Figure 3 Enterprise telecoms market by service type, (R'000) 2008

Source: BMI-T, 2010

The enterprise spend by service type is illustrated in the figure below, with fixed voice

spend still contributing to 38% and being R17.6 billion, mobile, LCR and bulk SMS spend at

R17.2 billion, internet access R3,75 billion and other data spend being R7.8 billion.

The enterprise telecoms market will grow from about R46.4 billion in 2008 to R68 billion in

2013, which amounts to a CAGR of 7.9%. Fixed voice continues to shows a negative growth

rate and the rest of the service types show positive growth over the forecast period.

As seen in the figure below % spend in all service categories except other data services

(which is predominantly in the large corporate sectors) are fairly evenly proportioned

between corporate and the SME and midmarket sectors.

Fixed Voice,

17,601 , 38%

Internet, 3,748 ,

8%

Mobile, 17,214 ,

37%

Other Data,

7,841 , 17%


Figure 4 Annual telecoms spend in all service categories ,(R'000) 2008

Source: BMI-T, 2009

The SME and midmarket telecommunications spend

The figure below illustrates the split by telecoms service types of the SME and midmarket

spend of R23.8 billion for 2008. This is expected to grow to R34.1 billion in 2013, a CAGR of

7.5%.

Figure 5 SME telecoms spend by service type, (R'000) 2008

Source: BMI-T, 2009

Due to a combination of new competition, bundling of services and disruptive applications

like VoIP, the fixed voice service category growth is being stunted. Due to the economic

downturn there has also been a consolidation of corporate companies, insolvencies, job

-

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

20,000,000

Fixed Voice Internet Mobile Other Data

Corporate Total SME Total

Fixed Voice,

9,654,503 , 41%

Internet,

2,204,539 , 9%

Mobile,

9,900,502 , 42%

Other Data,

2,010,233 , 8%


losses as well as a reduction in ICT spend and this has had a negative impact on the

immediate growth forecasts. Taking all these factors into consideration, a negative growth

rate of -1.3% is forecast in the fixed voice service category in the SME and midmarket

segment.

In the SME and midmarket segment, the mobile voice, LCR and SMS category shows a

growth rate of 10.2% over the forecast period. The assumptions for drivers of this growth

are the increased need for mobility in the workforce, an ongoing need for LCR, or a similar

type of application, to deal with the increased number of calls being made to mobile

devices, unified communications, as well as an increased use of SMS and MMS messaging

used by organisations for notifications, alerts, marketing and security. The inhibitors to

growth are the reluctance of organisations to take up and pay for contracts for their

employees’ cellphones, the substitution of LCR by other hybrid type applications, the

disruption of fixed mobile convergence, instant messaging and mobile VoIP.

Internet access and value-added services such as managed data network services (notably

IP VPNs) continue to exhibit strong growth rates, a trend that will continue over the

forecast period.

The internet service category includes all fixed, mobile and fixed wireless internet access

methods, including iBurst, WiMAX and CDMA 2000 1X. The CAGR of internet services is

18.7% and this high growth rate is stimulated by the need for companies for higher

bandwidth and speeds of services as well as having mobile internet connections to allow

for the increasingly mobile workforce. Businesses increasingly own more than one

broadband service. Business accounts with bundled offerings will increasingly offer

multiple points of access. Offerings from the mobile cellular providers are increasingly

adopted as a second service, over and above the existence of a fixed broadband

installation at home or in the business premises.

Other data services, including VPNs, are spreading quickly, causing very rapid growth in the

number of connected sites and we forecast a growth of 13.7%

The IT market in SA

The total IT services market (including hardware, software and services) is estimated to

have been worth approximately R65 billion in 2008.

As with the telecommunications market, the overall IT market is segmented into three

categories, namely: the Top 350 and other corporate organisations; tax registered SME and

midmarket companies; the residential, private and informal business sector which includes

non-VAT registered businesses.


Figure 6 Overview of total IT market spend, (R'000) 2008

Source: BMI-T, 2010

The figure above indicates the breakdown of the IT market into these four major groups:

the two formal business categories (Top 350 and other corporate, and SME and

midmarket) and the balance of the market, which consists of the residential/private and

informal business sector.

Figure 7 Overview of total IT market spend by service category, (R'000) 2008

Source: BMI-T, 2010

The corporate sector has the highest IT spend and constitutes 35% of the total market

share. Add the Top 350, and the total corporate market accounts for 66% of the total IT

market spend. The SME and midmarket segment comprises of 27%, and the residential

segment, the remaining 7%.

The enterprise IT market spend

The enterprise spend by IT service type is illustrated in the figure below. Hardware spend

contributes R21 billion (44%), services R18 billion (38%) and software R8 billion (18%).

Residential,

4,677,426 , 7%

SME and

midmarket,

17,568,836 , 27%

Corporate,

22,663,493 , 35%

Top 350,

20,166,245 , 31%

Hardware,

29,703,000 , 46%

Software,

11,462,000 , 17%

Services, 23,911,000

, 37%


Figure 8 Overview of total enterprise IT market spend by service category, (R'000) 2008

Source: BMI-T, 2010

The enterprise IT market will grow from about R60 billion in 2008 to R81 billion in 2013,

which amounts to a CAGR of 6.1%.

The SME and midmarket IT spend

The figure below shows the percentage split in expenditure on the IT product/service

categories. Hardware expenditure constitutes the greatest portion of the SME and

midmarket IT expenditure at 51% (R8.9 billion) in 2008 followed by services at 30% and

software at 19%.

Figure 9 SME IT spend by service type (R'000) 2008

Source: BMI-T, 2009

Hardware,

20,679,680 , 44%

Software,

8,186,818 , 18%

Services,

17,940,632 , 38%

Hardware,

8,949,618 , 51%

Software,

3,302,712 , 19%

Services,

5,316,507 , 30%

© BMI-TechKnowledge Group, 2009

2. MARKET DEFINED

This SA ICT SME and midmarket market

Converged End User Programme

telecommunications customer trends, size the markets a

SA ICT Converged End User Program

The SA ICT Converged End User Program

midmarket and corporate telecommunications market in South Africa but also focuses on

the spending behaviour, usage and perceptions of customers in the IT and

telecommunications environment.

The reports track previous BMI-T business IT and telecoms end user surveys, and look at

topics such as the spend on the usage of hardware, software and IT services and

telecommunications. Customer perceptions and intentions related to telecommunications

trends include mobility, internet access, core data services, IPVPN and adoption of

alternative voice services. From an IT point of view

emerging technologies, security, IT brands used, Web 2.0 and business c

covered.

The suite consists of the following reports:

SA ICT Converged

Source: BMI-T, 2009

Methodology

This SA SME ICT market sizing and forecast

composition of the SME and midma

from primary research inputs:

� profile of the SME and midmarket

other secondary sources

� spending patterns, based on BMI

� revenues are tied back to reported numbers for

- 8 -

arket sizing and forecast report is a module of SA ICT

me, where we analyse the enterprise IT and

elecommunications customer trends, size the markets and forecast the growth to 2013.

SA ICT Converged End User Programme

The SA ICT Converged End User Programme not only covers an overview of the SME,



T business IT and telecoms end user surveys, and look at



nternet access, core data services, IPVPN and adoption of

alternative voice services. From an IT point of view, topics such as IT business solutions,

emerging technologies, security, IT brands used, Web 2.0 and business continuity are

nsists of the following reports:

Figure 10 SA ICT Converged End User Programme

SA SME ICT market sizing and forecast report is based on a holistic model of the

SME and midmarket sector, and their spending patterns, formulated

the SME and midmarket customer base from BMI-T databases and

patterns, based on BMI-T's 2009 IT and telecoms end user surveys

enues are tied back to reported numbers for the given product/service type

May 10

eport is a module of SA ICT

, where we analyse the enterprise IT and

nd forecast the growth to 2013.

not only covers an overview of the SME,



T business IT and telecoms end user surveys, and look at



nternet access, core data services, IPVPN and adoption of

topics such as IT business solutions,

ontinuity are

report is based on a holistic model of the

sector, and their spending patterns, formulated

T databases and

the given product/service type

© BMI-TechKnowledge Group, 2009

� excluded are interconnections fees, wholesales services, capex and equipment

spend and services, ICT salaries or ICT intermediary

markups

Research components

The research includes a market sizing

research, as reflected in the report's chapter structure, are:

� number of business customers in each size category, segmented by key vertical

market sector

� adoption levels of various technologies and services within the

midmarket sectors' customer base

� the SME and midmarket

telecommunications services like internet, managed services

software and services spending

� overall IT and telecoms spending levels and growth trends in each service

category including forecasts to 201

� resultant revenues and forecast growth rates segmented by major

service category

The figure below illustrates how BMI

categories, each with the own sub segments.

BMI

Source: BMI-T, 2009

- 9 -

excluded are interconnections fees, wholesales services, capex and equipment

spend and services, ICT salaries or ICT intermediary consultants or reseller

a market sizing and forecast model. The four key components of the

research, as reflected in the report's chapter structure, are:

umber of business customers in each size category, segmented by key vertical

vels of various technologies and services within the SME and

' customer base

SME and midmarket companies' usage of fixed, mobile and other

telecommunications services like internet, managed services and hardware,

software and services spending and how will this change in future

telecoms spending levels and growth trends in each service

category including forecasts to 2013

esultant revenues and forecast growth rates segmented by major product or

BMI-T has combined the customer groups into two the

categories, each with the own sub segments.

Figure 11 BMI-T customer segmentation

May 10

excluded are interconnections fees, wholesales services, capex and equipment

consultants or reseller

model. The four key components of the

umber of business customers in each size category, segmented by key vertical

SME and

companies' usage of fixed, mobile and other

and hardware,

telecoms spending levels and growth trends in each service

product or

customer groups into two the


Customer segments and definitions

The following table summarises the categories and sub-segments used by BMI-T for

organisation size, where as mentioned above, classification was primarily according to

number of employees.

Table 1 Overview of customer segments and definitions

BMI-T classification Illustrative category label Number of organisations

Corporate report

Top 350 Top 350 350

Other more than 1,000 Very large 2,040

200 to 999 Large 20,470

Corporate total 22,860

SME and midmarket report

51 to 199 Midmarket 65,737

11 to 50 Small 335,323

2 to 10 Micro 214,018

SME and midmarket total 615,078

Total business market 637,938

Non-VAT registered businesses, informal, occasional (excluded from analysis) 1,700,000 – 2,500,000 Source: BMI-T, 2010

The figure below shows the BMI-T classification for ICT spending by percentage.

Figure 12 Percentage companies per BMI-T customer segmentation, 2008

Source: StatsSA, BMI-T 2009

NOTE. The 2-10 category contains many more organisations but these are not included as they are not tax registered due to being too small. They

are called 'non-tax registered businesses, informal, occasional' and are included with the, informal SOHO market

BMI-T business customer classification and StatsSA market classification

BMI-T has conducted user surveys that profile number of employees and telecoms

spending in various dimensions, which provide a useful basis for segmentation and market

modeling purposes. In general, BMI-T has more confidence in a classification that is based

primarily on employee numbers, rather than telecoms spending brackets. Cipro/StatsSA's

classification is based on economic data, which has been highly variable over the past 10

years and is not directly tied to employee numbers or telecoms spending – which is the

primary focus of the BMI-T model.

0.1% 0.3%3%

10%

53%

34%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

Top 350 More than

1000

200 to 999 51 to 199 11 to 50 2 to 10


In 2004 StatsSA, in collaboration with Cipro, a subsidiary of the Department of Trade and

Industry (DTI) and South African Revenue Services (SARS), compiled a set of estimates of

the composition of the SME sector. This segmentation was based on company annual

turnover brackets.

Cipro/StatsSA currently reports an estimated a base of 603,000 economically active

entities, excluding government customers. BMI-T has included government customers,

therefore adopting a higher number (638,000). The difference between the larger BMI-T

number and the lower number for Cipro/StatsSA is accounted for by these government

customers.

However, it should be noted that this is not an exact science, especially at the lower end of

the market, and there is still no single official view of the classification and number of

companies. There are numerous informal businesses operating with only a cellphone

connection, and these are generally excluded from our classification, and instead are

counted along with the residential/private and informal sector as non-VAT registered

businesses. A significant grey zone exists between the formal and informal business

sectors, and between formal businesses and home offices.

BMI-T has incorporated government organisations in its classification of both SMEs and

corporate and Top 350 organisations. The term ‘company’, ‘business’ or ‘enterprise’ (in

relation to SMEs) may thus occasionally be used loosely in this report to refer to any type

of organisation, whether constituted for-profit, not-for-profit (eg NGO), or governmental

organisation.

A further understanding of the possible differences is that StatsSA has sourced the number

of entities that are recorded by Cipro in their business register and analysed the tax

returns from SARS. Only those businesses and persons that have submitted a tax return

and are registered in the business register could be accounted for. There may be some

uncertainty where some entities are not registered for tax, mainly due to their annual

turnover threshold not requiring such registration. These entities mainly fall in the micro

segment of the market, and could also overlap strongly with home offices.

The 2-10 category contains many more organisations but they are not included as they are

not tax registered due to being too small and are called 'non-tax registered businesses,

informal, occasional' and they are included in the residential, informal SOHO market.

The Top 350 telecommunications spenders

Companies were identified by name, and each one was classified across a number of

different telecommunications spending categories, which in turn were used to inform the

allocations and forecast assumptions in the following segmentation model. The various

parameters and guidelines that were used to classify and select the corporate companies

for BMI-T's Top 350 telecoms spenders were:

� listing on the JSE, as well as other big companies operating in South Africa

� company size by number of employees and by annual turnover

� company size by vertical sector that are technology intensive

� telecoms usage and spend information BMI-T gathers from business end user

research


Industry vertical sector segmentation

Most statistics in South Africa are reported in terms of the Standard Industrial

Classification of all economic activity, commonly known as the SIC codes. This classification

is a South African adaptation of the international standard classification of economic

activity, and is produced by StatsSA. The following table summarises the key input

assumptions made for the sector segmentation analysis according to SIC codes.

Table 2 Detailed description of industry segments by SIC code

SIC code Industry

classification Subdivisions covered

1 Agriculture, hunting,

forestry and fishing

This sector includes the growing of crops and farming of animals, hunting and

game farming, forestry and logging and inland, coastal and ocean fishing and

fish farming.

2 Mining and

quarrying

Mining includes underground and surface mines, quarries and the operation of

oil and gas wells and all supplemental activities for dressing and beneficiating

ores and other crude materials such as crushing, screening, washing, cleaning,

grading, milling, flotation, melting, pelleting, topping and other preparation

activities needed to render the material marketable.

3 Manufacturing Manufacturing is defined as the physical or chemical transformation of

materials or compounds into new products, whether the work is performed by

power-driven machines or by hand, whether it is done in a factory or in the

worker’s home and whether the products are sold wholesale or retail and are

divided into process and discrete manufacturing.

4 Electricity, gas and

water

This sector looks at electricity, gas and water supply. It includes the generation,

transmission and distribution of electric energy. The manufacture of gas

includes the manufacture of gaseous fuels in gasworks, and the distribution of

gaseous fuels through mains.

5 Construction This sector includes building and construction, civil engineering, preparation of

site, and all fittings.

6 Wholesale and retail This division includes wholesale and retail activities. Wholesaling is defined as

the resale (sale without transformation) of new and used goods to retailers, to

industrial, commercial, institutional or professional users, or to other

wholesalers, or acting as agents or brokers in buying merchandise for or selling

merchandise to such persons or firms. Retailing is defined as the resale (sale

without transformation) of new and used goods to the general public for

personal or household consumption, or use by shops, department stores, stalls,

mail-order houses, hawkers and peddlers, consumer co-operatives, etc.

7 Transport, storage,

communication and

logistics

Communication includes the media, broadcasting and telecommunications.

Logistics can be described as the synchronisation and use of people, transport,

equipment, technology and buildings to efficiently and economically

consolidate and move merchandise under centralised control.


Table 3 Detailed description of industry segments by SIC code

SIC code Industry

classification Subdivisions covered

8 Financial

intermediation,

insurance, real

estate and business

services

This sector includes the organisations and professions as specified below. Some

overlap occurs with other sectors. This sector has close synergies chiefly with

sector 7 (transport, storage, logistics, communications), sector 9 (government,

community, health, education, gaming), and sector 6 (wholesale and retail

trade). This sector includes:

� banking and insurance (cross-referenced to

health sector 9 for medical aid)

� other financial services

� real estate

� research and development lawyers

� accountants, market research, management

consultants

� architects, quantity surveyors

� advertising agencies/recruitment agencies

� security companies (cross-referenced to

government security sector 9) 9 and 10 Government,

community, health,

social and personal

services

Public administration and defence activities, activities of central government,

regional and local authorities, all educational services, all health and social

work activities, other community, social and personal service activities.

Source: StatsSA, BMI-T, 2009

NOTE: For the purpose of the detailed quantitative analysis of this report, BMI-T has reported on the vertical sectors as defined by the SIC codes.

Number of companies by vertical sector and company size

The table and figure below illustrates BMI-T's segmentation by vertical industry sector and

customer segment by employee bracket

Table 4 Number of organisations by customer segment and vertical sector, 2008

Vertical industry sector Employee bracket

2 to 10 11 to 50 51 to 199 200 to 999

More than

1,000 Top 350 Total

Financial, business and other

services 127,431 124,418 21,200 7,577 544 55 281,225

Retail and motor trade 18,812 50,251 10,005 3,244 224 30 82,566

Manufacturing 16,814 36,213 10,255 3,370 459 86 67,197

Government and personal

services 9,256 42,147 6,479 1,139 323 78 59,422

Construction 13,811 25,309 4,728 1,499 46 8 45,401

Wholesale trade, and allied

services 6,998 19,612 3,943 1,146 93 14 31,805

Agriculture 8,761 11,312 2,145 646 46 11 22,921

Catering, accommodation and

other trade 4,952 13,212 2,630 855 59 8 21,716

Transport, storage and logistics 5,591 9,778 3,324 643 119 18 19,474

Mining and quarrying 525 1,213 502 213 107 26 2,586

Media and communication 571 990 329 70 12 12 1,983

Electricity, gas and water 497 867 197 68 9 4 1,642

Total 214,018 335,323 65,737 20,470 2,040 350 637,938 Source: Stats SA, BMI-T, 2010


Figure 13 Number of organisations by customer segment and vertical sector, 2008

Source: Stats SA, BMI-T, 2010

Telecoms service type categories

The telecoms service type categories BMI-T uses for its analysis are grouped as follows:

� fixed voice

� total fixed line voice services spend (PSTS including internet access call charges)

� call back for international calls

� voice over IP

� internet data

� ADSL

� analogue dial-up

� mobile data, data cards, USB ports for PC internet access

� Diginet or Biznet

� fixed wireless

� ISDN

� satellite

� mobile voice and data

� spending with cellular service providers and LCR operators

0 100,000 200,000 300,000 400,000 500,000 600,000

Financial, business and other services

Retail and Motor trade and repair services

Manufacturing

Government and personal services

Construction

Wholesale trade, commercial agents and allied …

Agriculture

Catering, Accommodation and other trade

Transport, storage and logistics

Mining and quarrying

Media and Communication

Electricity, Gas and Water

2 to 10 11 to 50 51 to 199 200 to 999 More than 1000 Top 350 Total


� company-owned or fully paid for cellphone accounts

� bulk messaging packages

� other sectors – managed data network services

� provided over leased lines like VPNs

� data hosting

Excluded are interconnections fees, wholesales services, capex and equipment spend and

services, ICT salaries or ICT intermediary consultants or reseller markups.

IT product and service type categories

The IT product and service categories BMI-T uses for its analysis are:

� hardware

� servers

� notebook and desktop PCs

� storage

� peripherals, MFPs, printers, copiers

� other add-ons

� Software

� system infrastructure software

� application, development and deployment

� applications

� IT services

� Deployment and support

� IT training and education

� systems integration

� customisation

� outsourcing

� IS consulting

Market sizing and forecasting

Base year

The base year of the market sizing and forecast model is the 2008 calendar year. The

values for this base year are arrived at by considering a combination of:

� ‘Top down’ numbers (derived reported telecoms operator and IT vendor

numbers).


� ‘Bottom up’ numbers that we have extracted from our enterprise end user

surveys and publicly available data on the universe of companies in South Africa.

The BMI-T customer surveys assist us in segmenting the market by company size,

and vertical sector. Differences in spending and service penetration across these

sectors are then observed, and used to inform the best estimates of each

assumption that is inserted into the 'bottom up' model.

The values within each segment are then rolled up to arrive at totals for each

product/service category, which are then compared to the 'top down' numbers. The model

is then calibrated by making finer adjustments to the 'bottom up' assumptions for each

market segment, such that the model balances.

The number of companies in different industry sectors per employee bracket was obtained

from:

� StatsSA and Cipro business registers. Only VAT or PAYE registered companies

could be accurately included, whilst an estimate of the number of non-tax-

registered companies is provided by StatsSA. This data is segmented by turnover

bracket and vertical sector, and thus has to be adjusted to fit our 'bottom up'

model, because we use the number of employees as the main company size

segmentation parameter, rather than company turnover. This is because the

employee count metric has proven to be more closely correlated to ICT spending

than turnover, and BMI-T’s clients have also found this segmentation more

useful.

� BMI-T takes the Cipro/StatsSA segmentations of the number of companies by

vertical sector and company turnover, and converts the turnover splits to

employee splits using the employee size to turnover ratios from the end user

survey data.

� This is taken a step further by mapping the vertical/employee cross-

segmentation thus derived to the average number of PCs per company. This is as

a result of finding the PC count parameter to be more strongly correlated, in

some cases, to ICT spending than the total number of employees in the

company.

Spend numbers per ICT service type and vertical sector are derived from the enterprise

end user surveys by:

� Estimated ICT spend per service type and vertical size per company is derived

from end user surveys.

� Apportionment of ICT revenue to company size categories and vertical sectors

are calculated by combining the number of companies per employee size

category and vertical sector.

� The percentage of each bracket relative to all companies is determined, and

used as an initial proxy for ICT spending.

� This percentage was applied to the ICT company spends to establish a

breakdown of the market size by vertical bracket.


Where expedient, the PC to employee ratio, as mentioned above, is used. The best

estimate of the PC to employee ratio for different industry sectors and employee brackets

is calculated from end user surveys and other studies.

IT Categories

The total IT spend is calibrated by means of IT product/service category ratios which

reflects differences between hardware, software and services splits of different industry

sectors and company sizes as obtained from BMI-T’s end user surveys and other studies,

notably the following vendor-derived total market sizing estimates.

� Hardware spend was derived from the number of units sold, the average dollar

price of the hardware and the exchange rate.

� The IT services spend was calculated from data obtained through vendor

interviews regarding their IT services areas and revenues obtained. This data was

then modeled to provide the total IT services market view.

� Packaged software revenue figures were based on secondary research and

forecasts applied to existing BMI-T data.

Telecoms

The total telecoms spend is calibrated by telecoms service category ratios, which reflect

the differences between fixed voice, mobile voice, internet and other data category splits

by industry sector and company size categories as obtained from end user surveys and

other BMI-T studies.

Forecasting

The ICT forecasts are derived from a combination of factors that include the economic and

ICT sector growth trends per service type.

Two key scenario assumptions that have been adopted for this purpose are (a) that the

economy will commence its recovery towards the end of 2009, and (b) that certain

industry sectors will be less affected by the downturn due to known infrastructure spend

or, alternatively, are being stimulated by the imminent 2010 soccer World Cup.

Overall economic forecasts are based on the combined overall economic forecasts of four

major South African banks up to 2011, and to 2013 with the forecasts averaged out by

economists' publications and financial services companies.

Indicators considered included forecasts of:

� CPI (CPIX pre 2009)

� GDP

� gross fixed investment

� the prime lending rate

� annual average ZAR/USD exchange rate


Other key forecast assumption variables include:

� Estimated growth in the number of companies by size in that vertical sector.

� The expectation for change in individual vertical sectors as derived from their

historical performance, and the anticipation of how well they will perform in the

future.

� The political-economic strategic focus as outlined by President Jacob Zuma.

Although all ICT service types are affected by the economic conditions certain ICT service

categories like hardware are more affected by the fluctuating exchange rate than ICT

services. Growth per service category also varies greatly by the position of that service

type on the market maturity/technology adoption curve as well as the expected change in

price for that service. An example is that internet access prices in general will fall further,

and within that broad category, dial-up is declining whereas ADSL and data cards are

growing rapidly in number of connections (although the prices for those services are also

coming down).

The growth in separate product and services markets was affected by the combined

forecasts from existing BMI-T reports. More details on these individual forecasts by

product/service type are found in the detailed reports on each market, e.g. SA Data

Service, SA Voice Services, SA Internet Services, SA IT Services Market, and so on.


3. SA ECONOMIC OVERVIEW1

2009 has seen South Africa’s economic growth move into a formal recession. Real gross

domestic product (GDP) contracted at an annualised 6.4% quarter-on-quarter (q/q) in the

first quarter of 2009, much worse than the previous quarter's -1.8% GDP growth, which

was the country’s first contraction in ten years. These two months’ negative growth

brought South Africa into its first recession since 1992. The 6.4% drop is the worst fall in

economic activity since 3Q84, when GDP shrank 6.5%, and was significantly lower than the

expectations of economists - for example, the Bloomberg consensus foretold -3.9%

growth.

The contraction was broad-based among the sectors of the economy, suggesting that the

economic recovery will be slow and challenging.

As preliminary data on Q2 comes through, poor manufacturing statistics, reduced mining

production, an increase in corporate liquidations and further drops in vehicle sales all

signal continued weak GDP growth. The National Treasury has stated that it now expects

negative quarterly GDP growth again in Q2, although the decline is expected to be smaller

than that of Q1.

The Treasury has downgraded its forecast for 2009 growth overall from 1.2% to zero. Most

economists however are talking about growth for the year between -2.0% and -0.5%.

2008 has been described as one of the most unbelievable years in history, with

unexpected and often unpleasant change surprising globally in the political, social and

economic arenas. Economically, the rapid devaluation of toxic assets in the US triggered a

major global slowdown which has been compared to the Great Depression of the 1930s. In

South Africa, in 2008, growth in real GDP had decelerated to 3.1% year-on-year (y/y),

following annual growth figures of 5.1% for 2007, 5.4% for 2006, and 5.0% in 2005, which

was the fastest pace of growth since 1984.

The SA Reserve Bank (SARB) has observed that the current contraction is a reflection of

deteriorating consumer and business confidence, declining global demand, and a relatively

tight domestic monetary policy. In addition, South Africa has not been able to escape the

negative consequences of the international financial turmoil, despite the fact that South

African financial institutions have very little direct exposure to the troubled assets that

were central to the deterioration of credit markets. The strength of South Africa’s financial

sector and stringent financial regulations has kept that sector steady, but the May

manufacturing production figures reveal that the global weakness has finally had a strong

negative impact on the manufacturing sector geared as it is for the export market.

The energy crisis was surely the major cause of the sharp decline in growth in the first

quarter of 2008, when the mines were forced to cut production, and commerce and

industry nationwide suffered loss of productivity. The deepening of the global financial

crisis and domestic political turmoil dominated the mid-2008 months. The uncertainty and

disappointment with government’s delivery to the electorate was played out in the streets

of South Africa, as outbursts of xenophobic violence strained the abilities of the police and

army to keep order. As corruption charges and the arms deal issues continued to be

1 Sources for this SA economic overview: StatsSA, SA Reserve Bank, Sacob, BER, Reuters, economics

departments of Standard Bank, FNB, Absa, Nedbank, Investec and other financial institutions,

Business Day, Financial Mail and other public domain publications.


assessed by Parliament and the courts, the country was subjected continually to street

protests, and rhetoric from representatives of factions within, and allied to, the ruling

African National Congress (ANC). At the end of 2008, a major new party emerged, the

Congress of the People (COPE) chiefly a breakaway by disaffected ANC members.

In 2009 some political calm was restored under the new president, Kgalema Motlanthe,

and politics in the first quarter of 2009 was dominated by the election campaigns, and by

the Zuma corruption issues, which culminated in the collapse of the National Prosecuting

Authorities’ case in April 2009, probably eliminating any likelihood of coming to trial. On

22 April 2009 the ANC was returned with a 65.9% majority in the general elections. The

results have been seen by analysts as being significant in terms of not achieving the

targeted two-thirds majority, and by marking the virtual collapse of the several smaller

historic political parties. The Democratic Alliance (DA) earned an increased opposition

minority, from 12% to 17%, and a majority in the Western Cape province, and the newly

emergent COPE party made its mark with just over 7% nationally. The peaceful elections

have encouraged investors, and to date President Zuma has provided no threats to the

current political stability.

In May 2009 President Zuma announced South Africa’s new cabinet, increasing the

number of ministries and creating a thoroughly new ministry structure. Of the 52 cabinet

positions only 15 return to their previous positions and 11 have been re-allocated, against

a 36-person strong flood of new recruits.

Notable changes in terms of economic policy are the establishment of a new Economic

Development Ministry and the creation of two new ministerial positions within the

presidency, the National Planning Commission and the office of Performance Monitoring

and Evaluation. The newly elected finance minister Pravin Gordhan immediately stated

that his department would work to ensure the continuity of economic policy while leaving

room to manoeuvre to respond to the global financial crisis.

Unemployment is possibly the major current concern, with the official unemployment rate

increasing from 21.9% in 4Q2008, to 23.5% for 1Q2009. This translates into a loss of

208,000 jobs during that first quarter. The chief sectors affected were the trade,

manufacturing and construction sectors. Just less than 100,000 jobs were lost in the

informal sector, which is of particular concern, since could imply persons at survivalist level

losing recourse to their last ditch attempt at earning income. High and increasing

unemployment levels, particularly as they are primarily of semi- and unskilled workers,

must be expected to have a negative impact on consumer spending and household

disposable income levels. From the political and socio-economic viewpoint, this profile of

unemployment is a threat to the country’s stability and growth prospects, and as a factor

of production, the shortage of skilled workers has long been a major inhibitor to growth.

Anecdotal information indicates that job cuts are still on the cards for some industries, and

analysts see that job losses totalling more than 400,000 are plausible over this

recessionary period.

When newly elected President Jacob Zuma delivered his first State of the Nation Address

at the beginning of June 2009, he identified ten priority areas, which form part of the

Medium Term Strategic Framework for 2009 to 2014.

� Speed up economic growth and transform the economy to create decent work

and sustainable livelihoods. The “creation of decent work” will be the central

influence of economic policies and initiatives. Phase 2 of the Expanded Public

Works Programme aims to create about four million job opportunities by 2014.

President Zuma announced an interim plan to create about 500,000 job


opportunities in the six months to December 2009. A training layoff agreement

was announced, whereby workers who would ordinarily be facing retrenchment

due to economic difficulty would be kept in employment for a period of time and

re-skilled. To promote a more inclusive economy, government intends to buy

more goods and services locally, in support of SMEs and to achieve affirmation

action policies, with the proviso that it will not undermine global

competitiveness or push up costs beyond acceptable levels. The state will also

reduce the regulatory burden on small businesses. A scaled up Industrial Policy

Action Plan will be developed. The lead sectors already identified are

automobile, chemicals, metal fabrication, tourism, clothing and textiles and

forestry. In addition, attention will also be paid to services, light manufacturing

and construction, amongst others, in the quest to create decent jobs.

� Introduce a massive programme to build economic and social infrastructure. A

newly-formed Infrastructure Development Cluster of government will oversee

this. An amount of R787 billion is budgeted for infrastructure expenditure in the

2009 financial year including allocations for the the 2010 FIFA World Cup, the

school building programme, public transport including the bus rapid transit

system, housing, water, and sanitation. Also to roll out the digital broadcasting

infrastructure and signal distribution transmitters, and reduce the cost of

telecommunications through the projects under way to expand broadband

capacity.

� Develop and implement a comprehensive rural development strategy linked to

land and agrarian reform and food security.

� Strengthen the skills and human resources base.

� Improve the health profile of all South Africans.

� Intensify the fight against crime and corruption.

� Build cohesive, caring and sustainable communities.

� Pursue African advancement and enhanced international cooperation.

� Ensure sustainable resource management and use.

� Build a developmental state, improve public services and strengthen democratic

institutions. Two Ministries have been established in the Presidency to

strengthen both strategic planning and performance monitoring and evaluation.

To ensure that local, provincial and national government improve service

delivery, the state will speed up the establishment of a single public service.

Economic indicators

The table below provides economic indicators for the past couple of years, with a forecast

to 2011. Forecast growth has declined from estimates of between 5% and 6% predicted

just over a year ago for 2009/2010, to between -1.5% and 0.0% for 2009. Most economists

see some return to higher figures in 2010/2011, but the 6% growth target set by the

government for 2010 is not perceived as remotely possible.


Table 5 Economic indicators for South Africa

2006 2007 2008 2009F 2010F 2011F

Currencies

R per US$ (average for year) 6.77 7.06 8.26 8.86 8.35 8.50

R per Euro (average for year) 8.52 9.66 12.06 12.07 12.10 12.95

Economic indicators

GDP at current market prices (Rm) 1,745,217 1,999,086 2,283,777 2,354,574 2,331,028 2,400,959

Economic growth (GDP % growth y/y) 5.0 5.1 3.1 -1.0 3.0 3.7

Gross domestic expenditure(%

growth y/y) 9.2 6.0 3.1 1.7 3.9 5.2

Final consumption expenditure by

households (% growth y/y) 8.3 6.6 2.3 -1.4 1.3 2.5

Final government consumption

expenditure (% growth y/y) 5.2 4.8 5.0 4.7 4.0 4.0

M3 Money supply (average) (%

change) 16.4 23.1 17.5 7.4 10.8 16.1

Balance of payments on current

account (% of GDP) -6.3 -7.3 -7.6 -5.0 -5.0 -5.8

Headline CPI (inflation) (% change) 4.6 7.1 11.6 7.3 6.1 5.7

Prime interest rate (average) 11.2 13.1 15.1 11.7 11.1 12.2 Source: SARB June 2009; Statistics SA 2009; Absa 27 May 2009; Standard Bank 10 June 2009; FNB May 2009; BMI-T 2009

Note: Economic forecasting is an inexact science, and forecasts can vary considerably, and this is particularly the case under the current economic

environment. Other comments are given in the accompanying text.

Business and consumer confidence

Business confidence, as reported by the South African Chamber of Commerce and Industry

(SACCI), remained largely unchanged in May 2009 at 81.8 from 81.9 in April. Retail sales,

imports, exports and liquidations numbers pulled the index down, while a positive rand

exchange rate, improvement in the domestic equity market and the further reduction in

interest rates during May helped to prop the index up.

Confidence remained above the seven year low of 78.9 reached in March 2009, so it is

possible that this might be indicative of a stabilisation in the pace of economic decline.

The RMB/BER Business Confidence Index declined by one index point during the second

quarter 2009 to a level of 26 from 27 during the first quarter. Analysts continue to be

surprised at the small decline in business confidence levels in view of the poor actual

business conditions, but claim that this must be an indication that perceptions are that the

economy is beginning on its upward turn in the present cycle.

The consumer confidence index (CCI) published by the FNB/BER increased by five index

points, during the first quarter of 2009, to +1 from –4 during 4Q2008. (A reading of +1

indicates that there are slightly more optimists than pessimists.) The CCI had fallen sharply

in 2008, plummeting from +22 during 4Q2007 to –4 during 4Q2008. Such a large

magnitude of drop in such a short time span has occurred only once before, in 1984/85.


Expenditure

Expenditure in South Africa is summarised in the table below:

Table 6 Expenditure in South Africa, 2006 forecasted to 2011

2006 2007 2008 2009F 2010F 2011F

Gross domestic expenditure(%

growth y/y) 9.2 6.0 3.1 1.7 3.9 5.2

Final consumption expenditure by

households (% growth y/y) 8.3 6.6 2.3 -1.4 (-4.9 in 1Q2009) 1.3 2.5

Final government consumption

expenditure (% growth y/y) 5.2 4.8 5.0 4.7 (5.9% in 1Q2009) 4.0 4.0

Gross fixed capital formation (%

growth y/y) 13.2 16.3 10.2 1.2 (2.6% in 1Q2009) 4.2 5.8

Foreign direct investment (R billion) -49.1 4.8 14.0 -0.7 -0.8 1.2

Private sector credit extension (%

change y/y) 25.8 21.5 13.6 7.0 (8.5% in 1Q2009) 9.7 16.2 Source: SARB June 2009; Absa 27 May 2009; Standard Bank 10 June 2009; FNB May 2009; BMI-T 2009

Expenditure tumbled in most areas during 2008 and 2009, with the exception of

government expenditure. Gross domestic expenditure contracted by nearly 4% q/q in the

fourth quarter 2008. Real household expenditure shrunk 4.9% q/q in 1Q2009, following

the 2.7% q/q in 4Q2008, and -0.9% in 3Q2008, thus placing household expenditure deeply

in a recession.

Foreign direct investment dropped dramatically from 2008 to the predicted negative flow

in 2009, which is set to be sustained through to 2010.

Growth in private sector credit extension (PSCE) has begun to drop at a striking pace,

month upon month. Total private sector credit growth in South Africa slowed to 8.5% in

March 2009 from 11.1% in February 2009, compared to 23.3% in January 2008.

Statistics are still reflecting a rising number of insolvencies and liquidations. Banks have

reported significant increases in bad debt. Households currently owe banks a staggering

R1.2 trillion, of which the greater part constitutes mortgage advances. The majority of

consumers are experiencing severe financial hardship, reflected daily in car repossessions

and house auctions, while falling house prices and reduced equities and pension fund

values mean that the wealth base of households is compromised. The first five months of

2009 showed an average decline of 2.7% in the median house price. A very real threat of

unemployment is a further inhibitor. At the moment about a third of South Africans with

impaired credit records are more than three months in arrears.

Household disposable income in 2008 was R1,329,264 million, having declined 2.5% over

the year. The changes in disposable income over the past five years, with particular

attention to the declines in 2008 and the beginning of 2009, are tabulated below:


Table 7 Percentage change in household disposable income 2004 to 2008

2004 (%) 2005 (%) 2006 (%) 2007 (%) 2008 (%)

Household disposable income (HDI) 6.3 6.6 7.7 6.5 2.5

HDI quarterly change 2008/2009 1Q2008 2Q2008 3Q2008 4Q2008 1Q2009

3.1 1.6 -0.8 -1.9 -4.5

HDI per capita (current rand) 18,720 20,421 22,559 25,147 28,088

HDI per capita (real % growth) 4.8 5.1 6.3 5.2 1.3

Household debt ratio to HDI 56.6 63.4 71.2 76.9 76.6

Source: SARB June 2009; BMI-T 2009

Finally households are beginning to curb their seemingly unlimited appetite for debt,

although the household debt-to-disposable income ratio remains at historically high levels.

This ratio came down to 75.5 in 3Q2008, from the high of 78.2 recorded in 1Q2008, but

has increased marginally to reach 76.7 in 1Q2009.

In May 2009 the SARB said that the high levels of household debt posed a potential threat

to the financial system as growth rates of household financial assets and net wealth had

begun to contract in the second half of 2008, indicating that households might be

liquidating part of their financial assets to reduce their debt. Data from credit bureaux

showed that the number of consumers with impaired credit records stood at 7.3 million in

December 2008.

Under these circumstances and with consumer confidence still at low levels, the demand

for big-ticket items, including vehicles and housing, is likely to remain constrained. The

SARB has expressed its hope that households experiencing financial distress will use the

breathing space provided by the four cuts in interest rates in 2009 to reduce debt levels

rather than to accumulate new debt.

Household expenditure on durable, semi- and non-durable goods all declined in the first

quarter of 2009, across all major expenditure sectors; the semi-durable sector, which had

retained fair growth through 2008, finally succumbing to the recession.

GDP per industry sector

The main contributors to the 3.1% increase in economic activity in 2008 were the finance,

real estate and business services industry (1.0 percentage point), the agriculture, forestry

and fishing industry, the construction industry and the general government services (each

contributing 0.5 of a percentage point) and the transport, storage and communication

industry (0.4 of a percentage point).

The first quarter 2009 saw the first contraction in the real value added by the tertiary

sector since 1992, largely on account of a decline in real output of financial services. This

meant that all three of the major sectors – primary, secondary and tertiary – recorded

negative real growth in the first quarter of 2009. The manufacturing (-32.8%) and mining (-

22.1%) sectors were the most severely affected followed by the financial services and the

trade sectors.

The RMB/BER Business Confidence Index declined during the second quarter 2009 in the

building and construction sector (-10), the manufacturing sector (-5) and the retail sector (-

5); it recovered somewhat in both the wholesale (+5) and motor trade (+7) sectors.


The GDP of South Africa at current market prices has risen from R1,395,369 million in 2004

to R2,283,777 million in 2008. The tables below show firstly the value of each industry

sector for the past four years, followed by the growth rates for each sector.

Table 8 Gross domestic product by industry at current prices (R million)

2005 2006 2007 2008

Agriculture, forestry and fishing 37,243 44,778 56,727 68,380

Mining and quarrying 103,012 127,144 148,215 196,094

Manufacturing 254,367 283,427 325,830 385,731

Electricity, gas and water 32,743 36,564 40,669 46,530

Construction 33,738 41,842 51,968 63,755

Wholesale and retail trade; hotels and

restaurants 192,820 216,499 237,232 260,287

Transport, storage and communication 134,056 144,164 155,788 165,824

Finance, real estate and business services 293,598 329,533 392,257 444,910

General government services 210,047 231,262 260,223 304,552

Personal services 83,366 93,595 106,063 117,424

Total value added at basic prices 1,374,991 1,548,810 1,774,972 2,053,487

Taxes less subsidies on products 168,985 196,409 224,114 230,290

GDP at market prices 1,543,975 1,745,219 1,999,086 2,283,777 Source: Statistics SA February 2009; BMI-T 2009

Note : Totals may not add up exactly, due to rounding.

Table 9 Growth - percentage change in GDP by industry at constant 2000 prices

2005 (%) 2006 (%) 2007 (%) 2008 (%) 1Q2009 (%)

Agriculture, forestry and fishing 5.4 -7.2 2.9 18.8 -2.9

Mining and quarrying 2.2 -0.3 0.0 -6.5 -32.8

Manufacturing 4.6 4.9 4.5 1.2 -22.1

Electricity, gas and water 1.7 2.8 3.0 -1.2 -7.9

Construction 12.4 13.5 17.1 13.9 9.4

Wholesale and retail trade; hotels and

restaurants 7.3 7.2 5.2 0.5 -2.5

Transport, storage and communication 5.3 6.6 5.6 4.0 -1.8

Finance, real estate and business services 5.2 7.2 6.8 5.0 -2.3

General government services 3.4 3.1 3.7 3.9 4.1

Personal services 4.4 5.8 4 4.1 3.1

Total value added at basic prices 5.0 5.2 5.1 3.2 -6.2

Taxes less subsidies on products 4.8 6.1 4.7 2.1 -9.2

GDP at market prices 5.0 5.3 5.1 3.1 -6.4 Source: Statistics SA February 2009; BMI-T 2009

Looking at the contribution of individual sectors to economic growth, a confirmation can

be seen of the recent significant shifts in the growth composition of the economy. For

example, manufacturing's contribution to growth had declined from 0.8 pecentage points

in 2004 to 0.2 points in 2008. It can also be seen that for example, construction, with its

consistent double-digit growth, is a small industry, only constituting 3.4% of GDP, but

contributing 0.5points to the 3.1% 2008 growth.

The table below indicates the contributions to the total seasonally adjusted annualised

changes in real GDP by industry sector, and also gives the relative size of each sector, in

terms of GDP. There has been a marginal increase in the size of the construction, transport

and communications, and finance sectors, while mining and manufacturing have declined.


Table 10 Sectoral contribution to gross domestic product growth (%)

Relative size Contribution to GDP growth (%)

Industry 2007 (%) 2008 (%) 2004 2005 2006 2007 2008

Agriculture, forestry and

fishing 2.3 2.3 0.0 0.1 -0.2 0.1 0.5

Mining and quarrying 5.8 5.6 0.1 0.1 0.0 0.0 -0.3

Manufacturing 16.3 16.2 0.8 0.8 0.8 0.7 0.2

Electricity and water 2.1 2.1 0.1 0.0 0.1 0.1 0.0

Construction 3.1 3.4 0.3 0.3 0.4 0.6 0.5

Wholesale and retail trade,

hotels and restaurants 14.1 14.1 0.8 1.0 1.0 0.7 0.1

Transport and

communication 9.7 9.9 0.5 0.5 0.7 0.6 0.4

Finance, real estate and

business services 19.6 19.7 1.5 1.0 1.4 1.3 1.0

General government

services 12.7 12.5 0.3 0.4 0.4 0.5 0.5

Personal services 5.3 5.3 0.1 0.2 0.3 0.2 0.2

Total value added 91.1 91.1 4.4 4.6 4.7 4.7 2.9

Taxes less subsidies on

products 8.9 8.9 0.5 0.4 0.6 0.4 0.2

GDP at market prices 100.0 100.0 4.9 5.0 5.3 5.1 3.1 Source: Statistics SA February 2009; BMI-T 2009

Note: The contribution is calculated by multiplying the percentage change of each industry (and taxes less subsidies on products) with its share of

GDP in the previous quarter (ie its weight).

Inflation

The SARB target for inflation is between 3% and 6%. The April 2009 annual change in

inflation as measured by the Consumer Price Index (CPI) exceeded the state’s 3% to 6%

target range for a 26th consecutive month. The last reading inside the inflation target was

in February 2007.

Continued revisions have had to be made to the target date. The SARB’s Monetary Policy

Review document shows a deterioration in the SARB’s inflation forecasts, whereby they

now expect CPI to fall below the 6% upper band only in 4Q2010 (previously it expected

inflation to fall back within the upper band by 3Q2009).

On 18 March 2009, the SARB announced that it was moving to a monthly MPC meeting, in

order to more swiftly react to inflationary pressures.

The year-on-year inflation rate declined marginally from 8.5% in March 2009 to 8.4% in

April 2009. The prices of food and non-alcoholic beverages increased at a year-on-year

rate of 13.7%, electricity and other fuels increased by 29.4%. Petrol prices declined by

17.5%, while public transport prices increased by 15.1%. In mid-May, Eskom applied for a

34% “interim” tariff increase that would apply to March 2010. This would increase

inflationary pressures.

The average inflation rate for 2008 was 11.6%. The annual average for CPIX was 6.5% in

2007, up from 4.6% in 2006 and 3.9% in 2005. In 2009 upward inflation pressures appear

to be entrenched, with CPI remaining over 8% each month in 2009, despite the interest

rate cuts. This leaves many analysts anticipating a further interest rate cut in June.


Interest rates

The banks’ prime lending interest rate has rapidly decreased by four percentage points

thus far in 2009. The prime interest rate had increased from 10.5% in mid-2006 by five

percent to a high of 15.5% in June 2008. The timing of the 2009 decreases are given

below:

� 2008 June 15.5% prime interest rate

� 2008 December 15.0%

� 2009 February 14.0%

� 2009 March 13.0%

� 2009 May 12.0%

� 2009 May 11.0%

However, the full impact of interest rate cuts on economic growth could take as long as

twelve to eighteen months. There is historically a lag in reaction, and, furthermore,

inflation tends to be sticky in a downward direction. In addition, further sharp increases

such as the proposed 34% in electricity tariffs are in the pipeline for the next few years.

This will put upward pressure on inflation and thus interest rates.

The SARB has made it clear on a number of occasions that price stability remains its main

concern, and that inflationary pressures are now more broad-based than just food and

energy price increases. However, there is increasing political pressure on the central bank

to reduce interest rates out of consideration for the poorer sectors of the population. The

way in which the prime interest rate has moved since 2003 are illustrated below:

Figure 14 Movements in prime interest rates, 2003 to 2009

Source: SARB 2009; BMI-T 2010


The rand exchange rate

On 1 June 2009, the rand exchange rate was just over R8 to the dollar. The rand has rallied

27% between February and June 2009, in its longest stretch of monthly gains since

December 2004, making it the the world’s best-performing major currency this year. While

the rand, along with other currencies, remains vulnerable to further possible bouts of risk

aversion, the risk to the inflation outlook has been reduced by the relative strength of the

rand.

The rand lost almost 30% against the dollar in 2008 and more than 26% against the euro,

making it the worst performer of the 16 most-actively traded currencies monitored by

Bloomberg in that year.

Issues

In April 2009, the ANC was returned to power, but just failed to achieve its desired two-

thirds majority in South Africa’s fourth democratic election. During May 2009 Jacob Zuma

appointed Pravin Gordhan as Finance Minister replacing the world’s longest serving

Finance Minister; Trevor Manuel. In the same month the new Finance Minister opened

discussions on the efficacy of inflation targeting and the Governor of the Reserve Bank

lowered interest rates by a full 2%.

South Africa’s efficacious and conservative management of monetary policy has long been

an accolade for the country and an investment driver. But since the 2009 elections, South

Africa’s trade union federation (COSATU) has voiced heavy criticism of government

policies, calling for dramatic cuts in interest rates and protection for jobs, and for the SARB

to change its inflation-targeting mandate. However, at the closing of the World Economic

Forum on Africa on 12 June 2009, President Jacob Zuma took a stand against threats of

general strike action by labour unions saying that “the challenge (to labour unions) is: Can

you, while you have this economic crisis, then find an opportunity to have more strikes?

Are they [the strikes] not exacerbating the issue?”

The global credit crisis continues to affect economic growth. GDP growth comparisons

show how the financial crisis was felt more powerfully in the developed countries. The

table below gives the quarter-on-quarter changes for the seminal quarters at the end of

2008 (when the global financial crisis hit), and year-on-year forecasts for the next two

years.


Table 11 GDP growth comparisons 2008 forecasted to 2010

% q/q

change

% q/q

change

% annual

change

% annual

change

% annual

change

3Q2008 4Q2008 2008 2009 2010

Areas

Global 1.2 -5.4 2.7 -1.7 2.9

Developed countries -0.9 -6.7 0.7 -3.7 1.5

Emerging countries 4.1 -3.6 5.6 1.2 4.8

BRIC (Brazil, Russia, India and

China) 5.9 -0.9 7.3 3.5 6.0

The Americas 0.7 -6.8 1.7 -2.8 2.3

Asia/Pacific 2.8 -4.9 4.9 1.0 5.2

Europe/Africa -0.1 -4.3 1.5 -3.3 0.9

Latin America 4.4 -9.1 3.9 -2.5 2.5

Emerging Asia 4.3 -2.9 6.7 3.8 6.6

Emerging Europe and Africa 3.4 -0.2 3.9 -3.0 1.5

South Africa 0.2 -1.8 3.1 -0.5 2.9 Source: Barclays Capital, Absa Capital April 2009; BMI-T 2009

The outlook for the global economy in 2009 remains gloomy with the International

Monetary Fund (IMF), the World Bank and the Organisation for Economic Co-operation

and Development (OECD), all forecasting negative growth for the year as a whole.

The impact on world trade from the financial crisis has been pronounced, and the World

Trade Organisation predicted that the volume of global merchandise trade would contract

by nine percent this year, compared to an annual average growth rate in trade in excess of

six percent since 1990. In an environment of weak demand and lack of trade finance,

international trade will continue to suffer. The motor industry has been particularly hard

hit as demand continues to decline globally. Not surprisingly, protectionist tendencies have

emerged, with some countries providing subsidies and discriminatory procurement

provisions in national stimulus packages. Also of relevance to the South African economy

has been the sharp decline in commodity prices. Fortunately, gold prices have remained

relatively firm, but other commodities such as platinum have declined significantly. The

turmoil on the international financial markets has also impacted on the destination and

size of capital flows, with capital flows to the developing and emerging market economies

expected to decline from over US$900 billion in 2007 to around US$165 billion in 2009.

At a regional level, Zimbabwe remains an issue, and a potential threat to South Africa’s

economic welfare. The power-sharing deal between President Robert Mugabe and his

political rival Morgan Tsvangirai, while signalling a new dawn for the suffering country, has

not yet been proven to be effective in dealing with economic revival, while the hardship of

its people continues, and the refugee problem in South Africa escalates.

The IMD World Competitiveness Yearbook rankings released in May 2009 have placed

South Africa's overall competitiveness from a ranking of 53 in 2008 to a marked rise in

position to 48 in 2009. The global competitiveness survey released by Productivity SA

ranks 57 countries in various areas of competitiveness. South Africa improved dramatically

in business efficiency from 38 last year to 30 this year. Infrastructure improved but

economic efficiency deteriorated. In economic performance South Africa ranked high for

its terms of trade index and cost of living index but low for its high unemployment rate


especially for youth unemployment and long term unemployment. In the competitiveness

ranking area of government efficiency South Africa scored high for effective personal

income tax rates and employee's social security contribution rates but ranked low in the

areas of exchange rate stability and equal opportunity legislation that encourages

economic development.

The future

The prolonged global contraction is beginning to be translated in South Africa into lowered

demand, corporate disinvestment, employment retrenchment, and cutbacks and closures

throughout industry sectors. This will exacerbate the current low levels of domestic

demand.

Moody’s investor services said in May 2009 that South Africa’s recession is likely to be

“brief”, predicting that the economy would return to growth in 3Q2009 as increased fiscal

expenditure, especially on infrastructure investment, and lower interest rates spur

consumer spending, and the country’s solid track record of prudent fiscal management

invites foreign investment. Moody’s cautioned, however, that the economy would

probably not “stage a more vigorous revival until sometime next year”.

However, more recent figures, especially the recent dramatic drop in manufacturing

production data, will surely incline analysts towards a more cautious view. Available data

for the second quarter 2009 data include the following:

� passenger car sales in May were -27% y/y and commercial vehicle sales were -

43% while car production was -50%

� manufacturing production overall in April was -21%

� mining production in April was -10%

� retail sales volumes in April were -7%

� residential building plans in April were down by 48%

Infrastructure spending of R787 billion is budgeted and nominated as high priority by the

new regime. According to National Treasury estimates, public sector infrastructure

expenditure is expected to average 9.7% of GDP over the coming three fiscal years,

compared to 4.5% in the 2005/06 fiscal year. During the current fiscal year, total

expenditure by the SA National Roads Agency Ltd (SANRAL) on roads is estimated at R19,6

billion, compared to R2,2 billion in 2005/06. In the near term, these infrastructure

programmes, as well as the soccer World Cup 2010 and all its attendant benefits, are

drivers of growth which are unlikely to falter. Sporting events in 2009 such as the

successful IPL Cricket tournament in May, and the currently-underway Lions rugby tour

and soccer Confederations Cup are altogether predicted to add R2 billion to the economy,

and boost South Africa’s tourism image.

Crime, however, remains one of the major threats to the country’s economic, political and

social future. Armed attacks on tourists visiting South Africa for the recent sporting events

have highlighted the vulnerability of this sector to negative publicity of this sort. The safety

and security of South Africa’s population as well as her visitors is one of the foci of Jacob

Zuma’s new government and new structures have been put in place to improve policing

and the judiciary.


The economic downturn will surely be reflected in lowered tax revenue. At the beginning

of June 2009, the Treasury forecast that tax revenue will be as much as R8 billion lower

than the R659 billion budgeted for in February 2009. Such shortfalls might restrain

progress on infrastructure plans, or force government to increase its budget deficit

through borrowing.

The fortunes of the domestic economy are very closely tied to that of the global economy.

Despite the many reports of "green shoots", the phrase which has become a byword for an

early indication of resumed economic growth, the process is slow and patchy. In the

SARB’s Quarterly Bulletin of 18 June 2009, the governor states, "Against the backdrop of

uncertain global financial markets it remains too early conclusively to confirm the arrival of

a turning point in global aggregate demand". The industrialised world is experiencing its

worst recession in almost 80 years, as was shown above, and many emerging markets are

also now slipping into recession. The overall consensus seems to suggest that at best only

the second half of next year may see a meaningful improvement in global conditions. In

particular, manufacturing and mining, which together make up nearly 20% of GDP, are

responsive to and dependent on global demand.

The challenge for South Africa in its duality, is to regain the growth imperative in its ‘first

world’ economy in the face of the inhibitors mentioned above, whilst simultaneously

providing sustainable solutions for the desperate needs of the poor in its ‘second’

economy by creating employment growth and expanding training opportunities, while

maintaining high productivity levels.


4. OVERVIEW OF CUSTOMER SEGMENTS AND

VERTICAL SECTOR

This section of the report focuses on the customer segments and vertical sector of the

business market.

The table below shows BMI-T's model of the total number of companies broken up into

the different vertical sectors and split according to organisation size. The highest number

of entities is within the financial and other services industry sector at a total 281,225,

whilst the manufacturing sector reports the second highest number of entities at 67,197.

Table 12 Number of organisations by company size and vertical sector, 2008

2 to 10 11 to 50 51 to 199 200 to 999

More than

1,000 Top 350 Total

Agriculture 8,761 11,312 2,145 646 46 11 22,921

Mining and quarrying 525 1,213 502 213 107 26 2,586

Manufacturing 16,814 36,213 10,255 3,370 459 86 67,197

Electricity, gas and water 497 867 197 68 9 4 1,642

Construction 13,811 25,309 4,728 1,499 46 8 45,401

Retail and motor trade and

repair services 18,812 50,251 10,005 3,244 224 30 82,566

Wholesale trade, commercial

agents and allied services 6,998 19,612 3,943 1,146 93 14 31,806

Catering, accommodation and

other trade 4,952 13,212 2,630 855 59 8 21,716

Transport, storage and logistics 5,591 9,778 3,324 643 119 18 19,473

Media and communication 571 990 329 70 12 12 1,984


services 127,431 124,418 21,200 7,577 544 55 281,225

Healthcare 2,603 7,114 1,093 135 54 6 11,005

Education 1,835 23,000 3,000 136 34 7 28,012

National government 7 15 9 19 20 39 109

Provincial and local government 33 87 14 5 4 15 158

Other personal services 4,779 11,932 2,363 844 211 11 20,140

Total 214,020 335,323 65,737 20,470 2,041 350 637,941 Source: Cipro, BMI-T, 2009

Note: There is a considerable 'gray area' in the 2-10 employee bracket in respect of the true number of companies in this sector, due to the

substantial overlap with the semi-formal home office sector, which is not counted here but considered to be part of the residential/informal sector.


Figure 15 Distribution of organisations by vertical sector and customer segment, 2008




0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Agriculture


Manufacturing

Electricity, gas and water

Construction

Retail and motor trade and repair services

Wholesale trade, commercial agents and allied …

Catering, accommodation and other trade

Transport, storage and logistics

Media and communication

Financial, business and other services

Healthcare

Education

National government

Provincial and local government

Other personal services

2 to 10 11 to 50 51 to 199 200 to 999 More than 1000 Top 350


Figure 16 Distribution of organisations by customer segment and vertical sector, 2008




0% 20% 40% 60% 80% 100%

2 to 10

11 to 50

51 to 199

200 to

999

More

than

1000

Top 350

Agriculture


Manufacturing

Electricity, gas and water

Construction

Retail and motor trade and repair

servicesWholesale trade, commercial agents

and allied servicesCatering, accommodation and other

tradeTransport, storage and logistics

Media and communication


servicesHealthcare

Education

National government

Provincial and local government

Other personal services


Economically active VAT registered SME and midmarket companies

This section of the report analyses the SME and midmarket sector in greater detail. There

are an estimated 615,078 SME companies with between two and 199 employees.

The table below specifies the SME and midmarket customer segments and definitions

used in the analysis for the purpose of this report.

Table 13 Overview of SME and midmarket customer segments and definitions

Employee category Definition Number of entities in 2008

51 to 199 Midmarket 65,737

11 to 50 Small 335,323

2 to 10 Micro 214,020

SME and midmarket total 615,080 Source: Cipro/StatsSA, BMI-T, 2010



The table below indicates the number of SME and midmarket organisations split by size

and by vertical sector. The highest number of companies falls within the financial and

other services industry sector, with 273,049 companies in total. This is followed by the

retail and motor trade and repair services sector and then by the manufacturing sector.

Table 14 Number of formal SME and midmarket organisations by customer segment and vertical

sector, 2008

2 to 10 11 to 50 51 to 199 Total

Agriculture 8,761 11,312 2,145 22,218

Mining and quarrying 525 1,213 502 2,240

Manufacturing 16,814 36,213 10,255 63,282

Electricity, gas and water 497 867 197 1,561

Construction 13,811 25,309 4,728 43,848

Retail and motor trade and repair services 18,812 50,251 10,005 79,068

Wholesale trade, commercial agents and allied services 6,998 19,612 3,943 30,553

Catering, accommodation and other trade 4,952 13,212 2,630 20,794

Transport, storage and logistics 5,591 9,778 3,324 18,693

Media and communication 571 990 329 1,890

Financial, business and other services 127,431 124,418 21,200 273,049

Healthcare 2,603 7,114 1,093 10,810

Education 1,835 23,000 3,000 27,835

National government 7 15 9 31

Provincial and local government 33 87 14 134

Other personal services 4,779 11,932 2,363 19,074

SME and midmarket total 214,020 335,323 65,737 615,080 Source: Cipro/StatsSA, BMI-T, 2010


Total business telecoms market analysis and forecast by customer segment.

The table and chart below illustrate the total business annual telecoms spend segmented

into corporate and SME and midmarket spend. Corporate organisations overall have a

forecasted annual telecoms expenditure growth to R33.8 billion in 2013 from R22.6 billion

in 2008, with spend growing slightly faster than the SME and midmarket sector at a CAGR

of 8.3%. The SME and midmarket sector has a CAGR of 7.5% with forecasted growth to

R34.1 billion in 2013 from R23.8 billion in 2008.

The table and chart below illustrate the total corporate and SME and midmarket annual

telecoms spend by customer segment.

Table 15 Total business telecoms market forecast analysis, (R'000) 2008-2013

2008 2009 2010 2011 2012 2013

CAGR 08-

13

Corporate 22,633,991 24,389,595 26,288,568 28,586,645 31,081,445 33,780,779 8.3%

SME and

midmarket 23,769,776 25,499,406 27,253,858 29,394,856 31,714,095 34,143,947 7.5%

Total business 46,403,767 49,889,001 53,542,426 57,981,501 62,795,540 67,924,726 7.9% Source: BMI-T, 2010

Figure 17 Total business telecoms market forecast, 2008-2013

Source: BMI-T, 2009

22,633,991 24,389,595 26,288,568 28,586,645 31,081,445 33,780,779

23,769,776 25,499,406

27,253,858 29,394,856

31,714,095 34,143,947

-

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

70,000,000

80,000,000

2008 2009 2010 2011 2012 2013

Corporate SME and midmarket


5. SME AND MIDMARKET TELECOMS MARKET

The table and chart below illustrate the overall SME and midmarket annual telecoms

spend by organisation size. Formal SME and midmarket organisations overall had a total

annual telecoms spend of R23.8 billion in 2008.

Table 16 Total SME and midmarket telecoms spend by customer segment, (R'000) 2008 Employee category Illustrative category label Total annual telecoms spend

2 to 10 Micro 2,099,512

11 to 50 Small 12,881,965

51 to 199 Midmarket 8,788,300

SME and midmarket total 23,769,777 Source: BMI-T, 2009



Category names vary from one source to the next. To avoid confusion BMI-T prefers to refer to the category by its employee bracket (e.g. 2-10).

The figure below indicates the percentage breakdown of SME and midmarket total

telecoms spend in 2008. The customer segment 11 to 50 employees had an estimated 54%

spend of the SME and midmarket total telecoms spend figure in 2008.

Figure 18 Overall SME and midmarket telecoms spend by customer segment, (R'000) 2008

Source: BMI-T, 2009



SME and midmarket telecoms spend by vertical sector

The overall SME and midmarket annual telecommunications spend by vertical sector is

detailed in the table and figure below.

The financial and other services sector accounts for a substantial amount of the overall

telecommunications spend at R9.8 billion, while the retail and motor trade and repair

services spend was R3 billion per annum. The manufacturing industry's telecoms spend is

R2.4 billion per annum on telecoms.

2 to 10,

2,099,512 , 9%

11 to 50,

12,881,965 , 54%

51 to 199,

8,788,300 , 37%


Table 17 SME and midmarket annual telecoms spend by vertical sector, (R'000) 2008

Vertical sector Telecoms spend Percentage of spend

Agriculture 263,104 1%

Mining and quarrying 107,277 0.5%

Manufacturing 2,437,385 10%

Electricity, gas and water 83,334 0.4%

Construction 1,571,314 7%

Retail and motor trade and repair services 2,993,778 13%

Wholesale trade, commercial agents and allied services 1,235,065 5%

Catering, accommodation and other trade 1,105,791 5%

Transport, storage and logistics 749,113 3%

Media and communication 252,071 1%

Financial, business and other services 9,782,261 41%

Healthcare 346,249 1%

Education 1,012,480 4%

National government 221,424 1%

Provincial and local government 193,180 1%

Other personal services 1,415,950 6%

SME and midmarket total 23,769,776 100% Source: BMI-T, 2010

SME and midmarket telecoms spend by service type

The four service types that we have segmented the telecommunications sector by are:

� mobile voice, LCR and SMS

� fixed voice

� internet services

� other data

The services that are included in each category are described earlier in the report under

the heading 'Telecoms services categories'.

The table and figures below indicate overall SME and midmarket telecoms spend by

service type.

Table 18 SME and midmarket telecoms spend by service type and customer segment, (R'000) 2008

Fixed voice Internet Mobile Other data

2 to 10 932,550 209,299 892,963 64,700

11 to 50 5,357,332 1,218,610 5,524,520 781,503

51 to 199 3,364,621 776,630 3,483,019 1,164,029

Total 9,654,503 2,204,539 9,900,502 2,010,232 Source: BMI-T, 2010




Figure 19 SME and midmarket telecoms spend by service type, 2008

Source: BMI-T, 2009

Fixed voice and mobile expenditure account for 41% and 42% of the total SME and

midmarket telecoms spend respectively. Whilst internet and other data expenditure

constitute 9% and 8% of the total SME and midmarket telecoms spend.

Figure 20 SME and midmarket telecoms spend by service type and customer segment, 2008

Source: BMI-T, 2009



Fixed Voice ,

9,654,503 ,

41%

Internet ,

2,204,539 , 9%

Mobile ,

9,900,502 ,

42%

Other data ,

2,010,233 , 8%

- 4,000,000 8,000,000 12,000,000

Fixed Voice

Internet

Mobile

Other data

2 to 10 11 to 50 51 to 199


Figure 21 SME and midmarket telecoms spend by organisation size and service type, 2008

Source: BMI-T, 2009



- 5,000,000 10,000,000 15,000,000

2 to 10

11 to 50

51 to 199

Fixed Voice Internet Mobile Other data


6. SME AND MIDMARKET TELECOMS FORECAST

AND ANALYSIS

SME and midmarket telecoms forecast analysis by service type

The table and figure below shows the annual spend of each service type and the projected

forecast for 2008-2013 for the SME and midmarket, with the internet category showing

the most growth at a CAGR of 18.7%.

Table 19 SME and midmarket telecoms spend and forecast analysis by service type, (R'000) 2008-2013

2008 2009 2010 2011 2012 2013

CAGR

08-13

Fixed voice 9,654,503 9,483,495 9,265,868 9,160,050 9,112,451 9,043,985 -1.3%

Internet 2,204,539 2,730,834 3,256,532 3,869,477 4,507,584 5,192,799 18.7%

Mobile 9,900,502 10,996,919 12,125,202 13,383,753 14,716,974 16,095,407 10.2%

Other data 2,010,233 2,288,158 2,606,256 2,981,576 3,377,085 3,811,757 13.7%

Total 23,769,777 25,499,406 27,253,858 29,394,856 31,714,095 34,143,948 7.5% Source: BMI-T, 2010

Figure 22 Total SME and midmarket telecoms spend and forecast analysis by service type, (R'000)

2008-2013

Source: BMI-T, 2009

SME and midmarket telecoms forecast analysis by customer segment

Overall SME and midmarket telecoms forecast analysis by customer segment

The table below shows the annual spend of each customer segment and the projected

forecast. The CAGR for the SME and midmarket is 7.5% overall.

-

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

2008 2009 2010 2011 2012 2013

Fixed Voice

Internet

Mobile

Other data


The highest telecoms spend for the forecast period is expected to be from the 11 to 50

employee customer segment with an overall growth of R5.4 billion over the forecast

period to R18.3 billion in 2013. The 51 to 199 employee customer segment is forecast to

grow by R4 billion, reaching a total of R12.8 billion over the forecast period. While the 2 to

10 employee segment shows an overall growth of R882 million over the forecast period at

a CAGR of 7.3%.

Table 20 SME and midmarket total telecoms spend by customer segment, (R'000) 2008-2013

2008 2009 2010 2011 2012 2013 CAGR 08-13

2 to 10 2,099,512 2,252,829 2,399,978 2,584,818 2,782,323 2,982,414 7.3%

11 to 50 12,881,965 13,787,601 14,705,640 15,822,838 17,039,804 18,315,628 7.3%

51 to 199 8,788,300 9,458,976 10,148,240 10,987,200 11,891,968 12,845,905 7.9%


Figure 23 Total SME and midmarket telecoms spend by customer segment, 2008-2013

Source: BMI-T, 2009



SME and midmarket telecoms forecast analysis for fixed voice services

The overall forecast for fixed voice (PSTS) spending is negative across the forecasted

period. Decreased revenues are primarily due to increased competition, bundled services

and VoIP. The SME and midmarket is expected to have a CAGR of -1.3%. The table and

graph below show the overall market spending for fixed voice by SME customer segment.

-

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

20,000,000

2008 2009 2010 2011 2012 2013

2 to 10

11 to 50

51 to 199


Table 21 SME and midmarket forecast analysis by customer segment and fixed voice services spend,

(R'000) 2008-2013

2008 2009 2010 2011 2012 2013 CAGR 08-13

2 to 10 932,550 921,107 902,141 895,565 893,173 886,797 -1.0%

11 to 50 5,357,332 5,257,713 5,135,151 5,072,809 5,044,685 5,006,632 -1.3%

51 to 199 3,364,621 3,304,676 3,228,576 3,191,676 3,174,594 3,150,556 -1.3%

Total 9,654,503 9,483,496 9,265,868 9,160,050 9,112,452 9,043,985 -1.3% Source: BMI-T, 2010



Figure 24 SME and midmarket forecast analysis by customer segment and fixed voice spend, (R'000)

2008-2013

Source: BMI-T, 2009

SME and midmarket telecoms forecast analysis for internet services

The internet service category includes all fixed, fixed wireless and mobile internet access

methods, including technologies like WiMAX and CDMA internet.

The table and graph below indicate the growth that is expected in this market by customer

segment.

Table 22 SME and midmarket forecast analysis by customer segment and internet spend, (R'000)

2008-2013

2008 2009 2010 2011 2012 2013 CAGR 08-13

2 to 10 209,299 260,964 311,960 371,923 433,999 499,722 19.0%

11 to 50 1,218,610 1,509,187 1,799,437 2,136,895 2,488,435 2,866,192 18.7%

51 to 199 776,630 960,682 1,145,135 1,360,659 1,585,150 1,826,885 18.7%




-

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

2008 2009 2010 2011 2012 2013

2 to 10

11 to 50

51 to 199


This high growth rate is stimulated by the need of corporate companies for higher

bandwidth and speeds of services as well as having mobile internet connections to allow

for the increasingly mobile workforce. The SME and midmarket is expected to grow at a

CAGR of 18.7% overall.

Figure 25 SME and midmarket forecast analysis by customer segment and internet services spend,

(Rm) 2008-2013

Source: BMI-T, 2009



SME telecoms and midmarket forecast analysis for mobile services

Mobile spend forecast includes both mobile voice and data spending in the business

sector. The primary categories constituting this expenditure are: fixed-to-mobile least cost

routing (LCR) services; company subsidised employee cellphone contracts; bulk messaging

packages.

The SME and midmarket's mobile spend is expected to grow at a CAGR of 10.2% overall.

The majority of the revenue will continue to come from standard voice services.

Revenues for the 2 to 10 employee customer segment are expected to grow to a total of

R1.5 billion by 2013. The 11 to 50 employee customer segment is expected to attain a total

revenue of R9 billion and the 51 to 199 employee segment is expected to have reached

revenues of approximately R5.7 billion by 2013.

Table 23 SME and midmarket forecast analysis by customer segment and mobile services spend,

(R'000) 2008-2013

2008 2009 2010 2011 2012 2013 CAGR 08-13

2 to 10 892,963 996,746 1,101,392 1,220,315 1,345,005 1,471,524 10.5%

11 to 50 5,524,520 6,131,662 6,758,643 7,455,502 8,195,724 8,963,108 10.2%

51 to 199 3,483,019 3,868,512 4,265,167 4,707,936 5,176,245 5,660,775 10.2%




-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

2008 2009 2010 2011 2012 2013

2 to 10

11 to 50

51 to 199


Figure 26 SME and midmarket forecast analysis by customer segment and mobile services spend,

(Rm) 2008-2013

Source: BMI-T, 2009



SME and midmarket telecoms forecast analysis for other data services

Other data services, which include MDNS and data hosting services and are an important

telecommunications growth sector with increased adoption, are spreading quickly, causing

very rapid growth in the number of connected sites.

The following table and chart show the expected growth (13.7%) across the SME and

midmarket for spend on other data services, forecast to 2013.

Table 24 SME and midmarket forecast analysis by customer segment and other data spend, (R'000)

2008-2013

2008 2009 2010 2011 2012 2013 CAGR 08-13

2 to 10 64,700 74,012 84,485 97,015 110,146 124,371 14.0%

11 to 50 781,503 889,039 1,012,409 1,157,632 1,310,960 1,479,697 13.6%

51 to 199 1,164,029 1,325,107 1,509,362 1,726,929 1,955,980 2,207,689 13.7%




-

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

10,000,000

2008 2009 2010 2011 2012 2013

2 to 10

11 to 50

51 to 199


Figure 27 SME and midmarket forecast analysis by customer segment and other data spend, (Rm)

2008-2013

Source: BMI-T, 2009



-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

2008 2009 2010 2011 2012 2013

2 to 10

11 to 50

51 to 199


7. OVERVIEW OF CUSTOMER SEGMENTS IN THE

TOTAL BUSINESS IT MARKET

For the purposes of this report, the business IT market has been segmented into two

major categories, namely: the Top 350 and other corporate organisations and tax

registered SMEs and the midmarket.

The total SA business IT market spend was about R60.4 billion in 2008. The Top 350 and

other corporate market has the highest IT spend and constitutes 71% of the total business

IT market, while the SME and midmarket segment comprises of 21%, with the total IT

spend decreasing correspondingly with company size.

The following table and figure reflects the overall IT spend by customer segment on IT

service categories. These IT service categories are:

� hardware, including notebook and desktop PCs, servers, storage, peripherals,

MFPs, printers and other add-ons

� software, including system infrastructure software, application development and

deployment and applications

� services including deployment and support, IT training and education,

customisation, outsourcing and IS consulting

The greatest portion of the overall IT spend is on hardware in both the corporate and SME

and midmarket segments. The corporate hardware spend is followed closely by the IT

services spend. In the SME segment the ratio of IT services to hardware spend is

considerably lower.

Table 25 Overall spend by IT services category, (Rm) 2008

Customer segment Hardware Software Services Total

Corporate 17,790,607 7,257,188 17,781,943 42,829,738

SME and midmarket 8,949,618 3,302,712 5,316,507 17,568,837



Figure 28 Overall IT spend by customer segment and IT services category, 2008 (R'000)

Source: BMI-T, 2009

Total SME and midmarket IT spend by customer segment

The table and chart below illustrate the total SME annual IT spend by organisation size.

SME and midmarket organisations overall had a total annual IT spend of R 17.6 billion in

2008.

Table 26 Total SME and midmarket IT spend by customer segment, (Rm) 2008

BMI-T category Illustrative category label Total annual IT spend

51 to 199 Midmarket 11,048,177

11 to 50 Small 5,713,972

2 to 10 Micro 806,688

Total 17,568,837 Source: BMI-T, 2010

Note that usage of category labels (eg "small", "micro", etc) varies widely, and are therefore shown for illustrative purposes only.

With 63% of the total SME and midmarket IT spend, the 51 to 199 employees segment is

the largest. A reduction in IT spend is observed with a corresponding decrease in company

size. A large proportion of organisations in the "micro" or 2 to 10 employee bracket spend

very little on IT, especially software and services. There is also a lower accuracy of the

market sizing in the 2 to 10 employee formal SME category due to the significant grey

boundary between this category and the informal sector. Many home offices are

sophisticated IT users, but are often counted under the residential and informal SME

sector and hence are not counted here.

- 10,000,000 20,000,000 30,000,000 40,000,000 50,000,000

Corporate

SME and midmarket

Hardware Software Services


Figure 29 Total SME and midmarket IT spend by customer segment, (Rm) 2008

Source: BMI-T, 2009



SME IT spend by service category

As mentioned previously, the three broad product or service categories that we have

segmented the IT sector into are:

� hardware

� software

� services

The services that are included in each category are described earlier in the report under

the heading 'IT services categories'.

51 to 199,

11,048,177 ,

63%

11 to 50,

5,713,972 , 32%

2 to 10,

806,688 , 5%


Figure 30 SME and midmarket IT spend by service type, (R'000) 2008

Source: BMI-T, 2010

The table and figures below indicate total SME and midmarket IT spend by service

category. The highest spend was on products in hardware, contributing 51% of spend.

Spend on services accounted for 30%, and the remaining 19% of the total IT spend was on

software. In 2008, IT services spending outweighed the annual software spend by over

R1.9 billion in the 51 to 199 employee segment, whereas in the 2 to 10 employee

segments the software spend was greater than the services spend by R67 million.

Table 27 SME and midmarket IT spend by category and customer segment, (Rm) 2008

Hardware Software Services Total

2 to 10 570,675 151,778 84,234 806,687

11 to 50 3,330,961 1,112,229 1,270,781 5,713,971

51 to 199 5,047,982 2,038,704 3,961,491 11,048,177




Hardware,

8,949,618 , 51%

Software,

3,302,712 , 19%

Services,

5,316,507 , 30%


Figure 31 Total SME and midmarket IT spend by category and customer segment, (Rm) 2008

Source: BMI-T, 2009



Figure 32 Total SME and midmarket IT spend by customer segment and service category, (Rm) 2008

Source: BMI-T, 2009



- 2,000,000 4,000,000 6,000,000 8,000,000 10,000,000

Hardware

Software

Services

2 to 10 11 to 50 51 to 199

- 2,000,000 4,000,000 6,000,000 8,000,000 10,000,000 12,000,000

2 to 10

11 to 50

51 to 199

Hardware Software Services


8. SME AND MIDMARKET IT FORECAST ANALYSIS

SME and midmarket IT forecast analysis by service category

The table and figure below show the annual spend on each IT spending category and the

projected forecast for 2008-2013 for the SME and midmarket, with the IT services market

showing the highest growth rate.

Table 28 SME and midmarket IT spend p.a. and forecast analysis by service category, (Rm) 2008

2008 2009 2010 2011 2012 2013 CAGR 08-13

Hardware 8,949,618 8,416,873 8,827,048 9,173,669 9,508,601 9,772,907 1.8%

Software 3,302,712 3,549,219 3,802,921 4,089,518 4,370,441 4,650,048 7.1%

Services 5,316,507 5,861,452 6,432,464 7,082,915 7,775,850 8,506,332 9.9%


Figure 33 Total SME and midmarket IT spend by service category, (Rm) 2008-2013

Source: BMI-T, 2009

Due to economic pressures and uncertainty companies are looking for ways to reduce and

contain costs. Historically hardware and PC’s specifically have been a bellwether for the IT

industry.

In the IT environment companies are rationalising in a number of ways:

Across the board companies are cutting down on discretionary spend. They are also

increasing hurdle rates and many new projects are on hold as quick return on investment

or cost reduction is required for projects to go ahead.

-

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

2008 2009 2010 2011 2012 2013

Hardware

Software

Services


Companies are “sweating their IT assets” looking to delay upgrades and implementing

technologies such as virtualisation to consolidate hardware and in doing so save costs.

Despite this environment IT Services remain resilient as companies still need to support

and maintain existing systems, as well as improve instead of changing systems.

Outsourcing and hosting also contribute towards IT services remaining robust as

companies seek to reduce capital expenditure and seek utility based models.

As confidence returns in the general economy we see a resumption of growth as

companies look to embark on projects that have been delayed as well as stay up to date

with the technological advances.

SME and midmarket IT forecast analysis by customer segment

Overall SME and midmarket IT forecast analysis by customer segment

The average CAGR for SME and midmarket organisations is 5.5% and BMI-T projects a

growth of SME and midmarket IT spend from R17.6 billion in 2008 to R22.9 billion in 2013.

The table and figure below shows the annual spend of each customer segment and the

projected forecast. The 2 to 10 employee segment has a forecast CAGR of 4.4% from 2008

to 2013. This translates to a R191 million increase on 2008's R806 million. The 11 to 50

employee segment will increase by R1.5 billion, and the 51 to 199 employee market

segment by R3.6 billion over the forecast period.

Table 29 SME and midmarket overall IT spend forecast analysis by customer segment, (Rm) 2008-

2013

2008 2009 2010 2011 2012 2013

CAGR 08-

13

2 to 10 806,688 800,938 851,550 904,166 954,885 998,318 4.4%

11 to 50 5,713,972 5,725,942 6,096,637 6,476,731 6,861,145 7,225,017 4.8%

51 to 199 11,048,177 11,300,663 12,114,245 12,965,205 13,838,863 14,705,953 5.9%



Figure 34 SME and midmarket overall IT spend forecast analysis by customer segment, (Rm) 2008-

2013

Source: BMI-T, 2009

SME and midmarket IT forecast analysis by customer segment and hardware spend

The hardware spend forecast includes spending on notebook and desktop PCs, servers,

storage, peripherals, MFPs, printers, copiers and other add-ons in the business sector.

The table and figure below project the average hardware spend at an overall CAGR of 1.8%

for the SME and midmarket over the 2008-2013 period. Overall spend is expected to climb

from R8.9 billion in 2008 to R9.8 billion in 2013.

Table 30 SME and midmarket IT hardware forecast analysis by customer segment, (Rm) 2008-2013

2008 2009 2010 2011 2012 2013

CAGR

08-13

2 to 10 570,675 542,527 571,192 597,883 622,674 640,713 2.3%

11 to 50 3,330,961 3,130,234 3,280,581 3,408,490 3,532,398 3,629,063 1.7%

51 to 199 5,047,982 4,744,112 4,975,275 5,167,295 5,353,529 5,503,132 1.7%


The 2 to 10 employee segment is expected to experience the fastest growth rate, with the

market forecast to be worth R640 million by the end of 2013. The 11 to 50 and 51 to 199

employee segments have a forecast CAGR of 1.7%, with the segments' annual IT spends

expected to climb by R298 million and R455 million in the five year period respectively.

-

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

2008 2009 2010 2011 2012 2013

2 to 10

11 to 50

51 to 199


Figure 35 SME and midmarket IT hardware forecast analysis by customer segment, (Rm) 2008-2013

Source: BMI-T, 2009

SME and midmarket IT forecast analysis by customer segment and software spend

The overall forecast for software spending is at a CAGR of 7.1% over the forecast period.

The table and figure below show the overall market spending for software by SME and

midmarket customer segment with an overall increase of R1.3 billion from R3.3 billion in

2008 to R4.7 billion in 2013.

Table 31 SME and midmarket IT software forecast analysis by customer segment, (Rm) 2008-2013

2008 2009 2010 2011 2012 2013

CAGR 08-

13

2 to 10 151,778 164,662 177,103 191,784 205,918 219,325 7.6%

11 to 50 1,112,229 1,194,716 1,279,372 1,375,695 1,470,173 1,563,614 7.1%

51 to 199 2,038,704 2,189,841 2,346,446 2,522,040 2,694,349 2,867,109 7.1%


The fastest growth in the software market is expected in the 2 to 10 employee segment,

with a CAGR of 7.6% over the forecast period. The highest growth in terms of market size,

however, is in the 51 to 199 employee segment with a total increase in software spend of

R828 million. The 11 to 50 and 2 to 10 employee segments are forecast to grow by R451

million and R67 million respectively over the six year forecast period.

-

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

2008 2009 2010 2011 2012 2013

2 to 10

11 to 50

51 to 199


Figure 36 SME and midmarket IT software forecast analysis by customer segment, (Rm) 2008-2013

Source: BMI-T, 2009

SME and midmarket IT forecast analysis by customer segment and IT services spend

The IT services category includes deployment and support, IT training and education,

systems integration, customisation, outsourcing and IS consulting.

The table and figure below project a CAGR of 9.9% in IT services spending. Revenue is

expected to grow from R5.3 billion in 2008 to R8.5 billion in 2013.

Table 32 SME and midmarket IT services forecast analysis by customer segment, (Rm) 2008-2013

2008 2009 2010 2011 2012 2013

CAGR 08-

13

2 to 10 84,234 93,749 103,256 114,500 126,292 138,280 10.4%

11 to 50 1,270,781 1,400,993 1,536,684 1,692,545 1,858,573 2,032,341 9.8%

51 to 199 3,961,491 4,366,710 4,792,525 5,275,870 5,790,985 6,335,711 9.8%


The 2 to 10 employee segment IT services spend is forecast at a CAGR of 10.4% translating

to a R54 million increase in annual IT services spending. The second fastest growing IT

services market (by a fraction of a percent) is the 51 to 199 employee segment, with an

expected growth from R4 billion in 2008 to R6.3 billion in 2013.

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

2008 2009 2010 2011 2012 2013

2 to 10

11 to 50

51 to 199


Figure 37 SME and midmarket IT services forecast analysis by customer segment, (Rm) 2008-2013

Source: BMI-T, 2009

-

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

2008 2009 2010 2011 2012 2013

2 to 10

11 to 50

51 to 199

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© 2009 All rights reserved. No part of this publication may be reproduced, photocopied or transmitted in any form, nor may any

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Note: Although great care has been taken to ensure accuracy and completeness in this project, no legal responsibility can be

accepted by BMI-TechKnowledge Group (Pty) Ltd for the information and opinions expressed in this report.

Every care has been taken to ensure the accuracy of this report. However, no liability can be accepted by BMI-TechKnowledge, its

directors, employees or the authors of this report for any loss incurred by any person or entity acting or failing to act as a result of

the contents of this report. The facts, estimates and opinions are taken from sources we believe to be reliable but which we cannot

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The inclusion or exclusion of any organisation is not a reflection of a judgement on the value of its activities. The organisations

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Trademarks are implicitly acknowledged..

sa sme and midmarket ict market sizing and forecast (june 2009)

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