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Category: ENTREPRENEURSHIP, The Entrepreneur


Is your business cashing in on South Africa
Written by Tendai Tambudze
21 November 2012

The internet contributes 2% to South Africa’s GDP and this contribution is increasing by 0.1% per year. This is according to a report by Arthur Goldstuck for World-wide Worx. The report titled” Internet Matters: The Quiet Engine of the South African Economy” quantifies the nation’s internet spend on products and service via the internet and the money spent on internet access and infrastructure.

The Internet is a hub of economic activities ranging from transactions to communications and downloads. In recent years it has become critical to economic progress for many  nations. The growth of technology and the internet has transformed industries – introducing both challenges and opportunities. A close examination of Goldstuck’s report highlights the remarkable opportunities that are available in South Africa and growing every day. 


The South African Picture

Internet penetration in South Africa is currently at 8.5 million users, representing 17% of the population. South Africa is lagging behind countries like Nigeria, Egypt, Morroco and Kenya. Nigeria leads the pack with the largest connected population: 45 million users (29% penetration). These countries however, have such a large internet base due to their reliance on cell phones rather than internet access infrastructure.

The study outlines that South Africa’s relatively low penetration is largely due to the price associated with internet and ADSL. Interestingly enough, South Africa’s cell phone penetration is the highest in the continent, indicating that most South Africans are not using their cell phones for internet access.


What is the internet economy?

The Internet economy conducts business through markets whose infrastructure is based on the Internet and World-Wide Web. As defined by Goldstuck, the South African internet economy is broken down into 5 components:

 

Access to and use of the Internet                   R29.2 billion

Investment in infrastructure                            R15.5 billion

Ecommerce (Business to Consumer)            R11.5 billion

Online advertising                                           R1.5 billion

Government expenditure                                R1.28 billion

TOTAL INTERNET ECONOMY                  R58.98 billion

 

The internet access and presence was quantified by estimating revenue data, user numbers, average costs from service providers like Vodacom, MTN and cell C as well as internet service providers like Dimension Data and Altech. 

The measure of investment in infrastructure took into account the major capital expenditure by telecommunication companies like Telkom, the major cell phone service providers on their fibre networks as well as the West Africa Cable system (South Africa is estimated to carry 60% of the cost.)

Ecommerce is dominated by online shopping. Figures show that the airline industry is leading the pack with e-ticketing sales, which come close to R9 billion a year. 

Online advertising is growing at a rate of 35% per year and is dominated by expenditure on Google adwords. The major websites in South Africa are also making money through advertising. According to the effective measure statistics, The top South African websites as of October 2012 were Howzit.MSN, which attracted the most unique visitors ( 3.4 million), followed by News24 and IOL.

The final aspect of the internet economy is government spending on ICT development, broadband and internet access, which is estimated at R1.28 billion. 


What does this mean for SMEs?

410,000 SMEs in South Africa have a website, representing 63% of active, formal SMEs.

This means that a third of SMEs in South Africa are at danger of making themselves irrelevant. The implications of not having a website include losing out on a valuable communication channel and potential revenue.

The SME Survey 20012 has conclusively shown that having a website correlates to higher profitability. The survey also highlighted the perceptions around an internet presence:

  • 30% of companies with a website stated that their business would not have been possible without the website
  • 39% regard their website as their key method of contacting their customers
  • 41% consider their website to be key to customers contacting them
  • 39% use their websites to regularly update their inventory
  • 86% say their website is a important when competing against other businesses

 


Companies can no longer avoid the internet economy

All businesses will benefit from an enhanced internet presence; however this is just the first step. The different aspects of the internet economy show that there is money to be made in many different ways. At an estimated growth of 0.1% a year, this essentially means that 2013 has millions worth of new business to offer to those who see the opportunities. 


Sponsor Specials: KOLEV MOTORS

 


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