Research on the Performance of the Services Sector

5.15. Value Chains

Figure : ICT Value Chain



Source: 2007, McCormick & Onjala, Methodology for Value Chain Analysis in ICT industry: Frameworks for the Study of Africa

The various stages of the ICT value chain are interconnected and rely on efficient relationships between each stage for the value chain to function effectively. The ICT value chain consists of manufacturing as well as services. The manufacturing of components and technologies rely on support services such as raw materials, fuel, infrastructure and workforce. These components are manufactured and used in the ICT services sector, where products and services are offered to the final consumers.

The value chain in the illustration above is an international standardised one that includes all aspects of the industry from services to manufacturing. However within South Africa, manufacturing is not a large part of the sector and as such the main areas within the South African value chain are, design and products development, distribution and trading to final consumers.

Assessing the diagram above it is evident that the first stage of the ICT value chain is the conceptual design and development of a product. A recent example of this is the i-pad. During this stage designers and developers conceptualise the product and design both the hard and soft ware aspects in the form of prototypes.

Once the prototypes have proven successful the product is the moved into the manufacturing stage, (it is important to note that often a triangular manufacturing system is employed i.e. Initial development an prototyping are performed in one country i.e. South Africa, manufacturing is then done in another country i.e. China and finally sales and distribution take place in a third country i.e. USA.) During this phase the actual assemble of the product takes place, hence the need or infrastructure to house and supply the manufacturing plant, machinery to conduct the manufacturing and assembly as well as packaging and labeling of the final product. It is important to bear in mind that during this phase there may be many other services provides involved especially where the manufacturing plant is large and machinery need to be maintained.

The final sections of the ICT value chain represent the bulk of the ICT sector in S.A. This refers to the logistics and distribution of the packaged product. At this stage the product is sent through various channels to stores i.e. Incredible Connection, Makro, and Game etc where it is purchased by consumers and then used.

The opportunities that have been identified within the industry exist in the services value chain. These services include installation of CCTV equipment and systems, companies that offer a diverse product offering to consumers such as marketing, hosting and system maintenance, and bulk short message services (sms) - this can include resale of bulk sms or the use of sms for advertising and marketing.

Further opportunities exist in the manufacturing and installation of set top boxes and residential satellite television installations. Specific opportunities that exist in the provinces in the ICT value chain are illustrated in the table below.

Table19: ICT Opportunities per Province

Opportunity	Province
	WC	EC	NC	KZN	NW	Limp	MPA	GAU	FS
Business application software					x	x	x
Cctv systems	x
Creative industries		x				x	x	x	x
Document management systems	x						x
e-learning, e-banking software development			x		x		x	x	x
e-waste management	x						x
Internet and wifi provider		x		x	x	x		x
IT training and software development	x			x		x		x
Multimedia platforms	x	x							x
Network development				x				x
Online marketing	x	x	x				x
Social media platforms and software	x	x	x
Telecommunications and technology development	x	x				x			x
Voice over IT								x
Website development			x	x	x		x