Research on the Performance of the Services Sector

Identification of high potential subsectors

The South African Department of Trade and Industry (DTI) identified potential investment opportunities within the ICT sector based on the development of:

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  Access control and security systems and equipment;
  
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  Automotive electronic subsystems;
  
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  Systems and software development in the banking and financial services sector;
  
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  Silicon processing for fiber optics; and
  
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  Integrated circuits and solar cells. ⁹
  

The duality of South Africa’s economy makes it an ideal market for the testing of new innovations. South Africa is recognized as one of the top 30 software development outsourcing destinations. In 2007, South Africa was globally ranked on a par with Australia and India.⁷⁹ South Africa is also an established global provider of quality, low cost call centres. The country provides call centres for AOL, ASDA, Virgin Mobile UK, Samsung’s European digital camera division and others.¹² The majority of ICT multinationals operating within the sector maintain representative distribution outlets for the supply of goods and services and partake in little to no local manufacturing, R&D or solutions creation. South Africa’s IT spending in 2009 is expected to reach R97 billion with expected growth at 5% per annum over the next 5 years.⁸⁰

South Africa’s key areas of expertise include:

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  Managed (outsourced) services
  
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  e-Security
  
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  Biometrics and software development
  
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  High-end ICT product and services consultancy.⁹
  

Further opportunities for growth for ICT sectors and particularly SMMEs in South Africa are:

Educational and Skills development platforms and programmes such as E-learning- by increasing the use of ICT products and technologies in schools, the number of learners in South Africa with access to computers and internet will increase and improve the skills and knowledge of learners. These skills and knowledge are transferrable and can be developed into businesses and SMEs.

Increasing access to internet and broadband subscriptions- by lowering the cost of internet and broadband, the demand for these products will increase which will in turn create jobs and promote the industry and the economy.

Job creation potential

The industry has grown to such an extent that in 2010, 12.78% of jobs created in that year were in ICT. This amounted to 344 384⁸¹ jobs being created in 2010.

Figure : Percentage of Jobs created in the ICT sector (2003 – 2010)

Source: FDI Intelligence 2011, analysed by FEM Research

The graph above provides a graphical representation of the increase in employment levels in the national ICT sector. Despite declining global expenditure during the period 2008-2010, the national ICT Sector has managed to achieve a 3.96% increase over the same period.

Within the industry the sector that created the most jobs in 2010 was the Electronic Components sector with 153 308 jobs created, followed by Communications with 103 777 jobs created and Software and IT with 87 299 jobs. The number of jobs created in the sectors has increased since 2009. However, the Software and IT services has seen a decrease in the number of jobs created since 2008, while the economic recession can account for the decrease in 2009 it was expected to increase in 2010 along with the other sectors. The continued decline may be attributed to the scarcity of skilled employees in the sector.

Table 18: Breakdown of jobs created in ICT sectors

Sector	2005	2006	2007	2008	2009	2010
Electronic Components	119,324	115,827	160,855	147,185	110,351	153,308
Software & IT services	103,383	123,737	120,128	129,832	105,831	87,299
Communications	90,436	108,245	82,567	76,743	95,399	103,777
Total Jobs created	313,143	347,809	363,550	353,760	311,581	344,384

Source: FDI Intelligence 2011, analysed by FEM Research

Skills shortages in the ITC sector are a major problem for the growth of the industry and therefore the job creation potential of the sector is huge for South Africa. The IT and Communication Technology sector falls within the Technical sector and the estimated shortfall of IT skills for 2009 was 24%⁸². This shortfall relates to the skills required to develop, build and manage the IT systems required to support economic growth in the country. The number of people required to address this shortfall is approximately 100 000 skilled workers. In 2010 the estimated shortage of skilled IT specialists in the manufacturing sector alone numbered 14 000. The biggest problem experienced by businesses in the IT and Communications sector is the availability of South African skills, businesses have begun importing the skills they require. This proves that the sector has great potential in creating jobs if sufficient training and development of job-seekers takes place.

The Department of Communications hopes to create job opportunities through direct funding and have outlined the following objectives⁸³:

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  160 000 jobs should be created in the set top box industry.
  
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  25 000 jobs should be created in the broadband access arena.
  
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  8 500 jobs were earmarked for content creation.
  

The widespread provision of broadband access through the laying of new submarine cables presents many new job opportunities for the sector. The laying of cables and the subsequent usage thereof will create both direct and indirect employment opportunities. Furthermore the increased broadband connectivity presents job opportunities to the sector too: people will need the technology to access broadband and they will need network and IT support to connect efficiently, increased broadband access means that more service providers can emerge in the market too, creating more jobs and businesses.