Government ICT Spending Trends

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					Government ICT Spending Trends

White paper prepared by Lesley-Anne Dos Santos – Enterprise Research
Business Manager
September 2009
Introduction
The South African government is one of the primary users of technology in the country. Given the
demands placed on government for service delivery, one should expect this trend to continue as IT plays
a role of ever-increasing importance in the nation.
Therefore the public sector ICT market is seen by most vendors as an attractive market since it is large
and characterised by extensive projects. It is also not influenced by international fluctuations and other
economic changes like the commercial sector. However, it is a difficult market that is strongly influenced
by political decision-making. Standardisation recommendations are still guiding choices that are made
locally. Go-to-market strategies of IT and communication vendors are being adapted in order to acquire
more public sector customers. The ultimate aim is to effectively address the government sector.
This white paper includes information relating to ICT in the South African government and also highlights
various ICT adoption trends while providing an understanding of ICT expenditure in National and
Provincial government. The BMI-T 2009 SA ICT in Government Spending Trends Report includes more
detailed information relating to these aspects mentioned in this white paper and provides detailed
information on the new government and cabinet structure, a breakdown of ICT expenditure in National
and Provincial Government (including spend on hardware, software, services and telecommunications
forecasted to 2013) and other key ICT aspects relating to this.
What effect has the recession had on South Africa over the past year?
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.
The impact of the global financial crisis on South Africa was cushioned by the existing tight regulatory
control over the banking sector that the South African government had already set up before the
international credit crunch occurred. South Africa's rapid emergence from the restrictions of apartheid
had exposed the majority of her citizens to unfamiliar financial opportunities and transactions, and the
government has been lauded internationally for the foresight and thoroughness of legislation such as the
National Credit Act.
The economic reforms applied over the past 10 years will assist South Africa to sustain, grow and spend
on the drivers of long-term growth. The boost South Africa is getting economically relating to the 2010
FIFA World Cup, increased competitive currency, good banking systems, decreasing inflation and
reductions in interest rates should allow for a steady recovery in household spending and economic
growth particularly over the medium term.
However, South Africa has not been totally immune from the global economic recession and the
downturn has impacted on South Africa including company liquidations and closures, increased
unemployment, decreased economic growth and asset depreciation.
At the end of 2008, the Presidential Economic Joint Working Group, including Organised Labour, Business
and Government, met to consider how South Africans should respond to the economic conditions the
country was facing.




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A summary of the South African government's response to the global downturn is included in the figure
below.

                                            Figure 1
                           South Africa’s Economic Policy Response




 Source: BMI-T, 2009

BMI-T’s 2009 Government report investigates the major changes that have occurred in
government over 2008 and 2009 and the impact this will have on ICT budget’s and
expenditure of all three spheres of government.




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Government adapting to the ever-changing political, technological and
economic environment
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 returned to their
previous positions and 11 have been re-allocated, against a 36-person strong flood of new recruits.
Government wants a structure that would enable them to achieve visible and tangible socio-economic
development within the next five years. The goal is to have a structure which would enable them to
effectively implement their policies. The structure of Cabinet and national departments has therefore
been re-organised to achieve better alignment between the structure, electoral mandates as per the
election Manifesto, and the developmental challenges that are required to receive immediate attention
from government.
National and Provincial Government ICT spend
Government is aiming to develop an information society where solutions are citizen-centric, transparent
and efficient. The successful development of an Information Society enables increased growth in ICT and
its adoption in all economic sectors in the country. Effective service delivery is a key focus for
government but officials are frustrated at the slow pace of progress particularly in local and provincial
government. Government is aiming at implementing e-government and related services through the use
of ICT in order to become more efficient and effective and ultimately improve service delivery. The major
goal is to become more citizen-centric by using technology as tool to change how Government operates
and interacts with clients. The private sector needs to understand that in order for Government to be
successful in implementing e-Government services, key active partnerships need to be created.
There is currently tremendous spending pressure on the South African Government and a goal that
government is working towards is using IT effectively and efficiently to improve social development
especially during the 2009/10 financial year. A major focus in 2009 is to modernise government systems
and to improve existing systems and processes.
Some of the biggest ICT spenders in national government are shown in the figure on the next page. BMI-
T’s updated government ICT spending report provides details relating to the key ICT and service delivery
focus areas for the coming years.




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                                                    Figure 2
                                   South Africa’s Economic Policy Response


                                                            Dept of
                                       Dept of Justice       Home             Dept of Public
                                            and             Affairs              Service
                                       Constitutional                         Administration
                                       Development
                                                            Dept of
                                                Dept of      Safety         Dept of
                                                 Trade        and           Science
                                                  and       Security          and
                                               Industry                   Technology




     Increasing the uptake, usage of, and access to ICT through partnerships with business and civil society is a
                                                      key focus.
 Source: BMI-T SA ICT Government Spending Trends, New Broom’s, New Budget’s

The total national government ICT expenditure on vendors/service providers will increase from R4.1
billion in 2008/09 to just over R5.6 billion by 2012/13.
The total ICT expenditure for provincial government will increase from R3.3 billion in 2008/09 to R4.2
billion in 2012/13. Gauteng province had the highest overall ICT spend in 2008/09 compared to the
other provinces.
The ICT spend information was compiled from various sources, including face-to-face interviews with
government ICT managers, BMI-T hardware, software, services and communication research and the
National Treasury Estimates of government expenditure, 2009.
The SA ICT Government Spending Trends report includes the following ICT spend breakdowns:
         ICT expenditure breakdowns (i.e. expenditure on ICT vendors excludes spending with SITA) per
          department and provinces forecasted to 2013
         Expenditure on SITA services for the base year 2008/09 per national department and province.
         ICT spend broken into ICT service categories (per national department and province) including
          hardware, software, services and telecommunications and spend is forecasted to 2013.



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Government ICT adoption trends
A snapshot of key inhibitors affecting effective government ICT deployment is shown in the diagram on
the next page.

                                                      Figure 3
                                            Major ICT Adoption Inhibitors




 Source: BMI-T ICT in Government Programme, 2008

Some of the drivers of ICT adoption for 2009 include skilled and training staff
requirements; enhance effectiveness of operations; and management of ICT (i.e.
development of human resources).




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BMI-T’s SA ICT in Government Research Programme
The 2009 Government report includes new research findings of major drivers and inhibitors of ICT
adoption in government as well as the top criteria and reasons for government departments choosing
primary suppliers of IT products and services, based ona compilation of quantitative and qualitative
information from face-to-face and telephonic interviews with a number of government respondents.

In 2008, BMI-T published the ICT in Government Programme which included four reports/modules as
seen in the figure below. These reports include a comprehensive look into ICT in national government,
provincial and local government and state-owned enterprises. Areas covered include, the breakdown
and structure of each government department, detailed descriptions of major projects, initiatives and
developments taking place within government as well as ICT related aspects including detailed
breakdowns of ICT expenditure.


                                             Figure 4
                        Overview of BMI-T Government Research Programme

                  2008
                 ICT
                  in
             Government
             Programme




                                                                                Assisting ICT vendors and
                                                                                maximise future performance
                                                                                   in the government market

                                                                                     service providers to
                                 National and Provincial Government


                 2009             New Government structure and
              SA                        cabinet changes
          Government
        Spending Trends                  Update of ICT major
       New Brooms, New Budgets       projects, developments and
                                              major deals
                                        New ICT expenditure
                                                figures
                                           (incl. forecasts)



 Source: BMI-T, 2009

 BMI-T's 2009'report 'SA Government ICT Spending Trends - New Broom's, New Budgets'
 complements the 2008 ICT in Government Programme and covers new up-to-date,
 more granular level ICT expenditure within National and Provincial Government. Many
 changes have taken place within government due to the 2009 Elections and the
 economic recession which has significantly impacted the South Africa marketplace. This


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 report includes which key government projects have been prioritised and what the key
 focus areas are for the coming years.
Research Methodology

 The research methods used by BMI-TechKnowledge for this report represent market
 data that is acquired and defined based on a number of proprietary and public sources,
 both primary and secondary. The information is then filtered through BMI-T’s
 forecasting and analysis process.
 The report is a compilation of quantitative and qualitative information from a number
 of sources, and includes face-to-face and telephonic interviews with a number of
 government respondents.

         Designation of respondents interviewed includes key decision makers in the
          South African national and provincial government:

         Chief Information Officers (CIO)

         IT Managers

         Telecommunication Managers

         IT Operation Managers

         IT/ICT Directors

  Related Research
         SA ICT Vertical Market Programme (includes 5 vertical sector modules)
         SA ICT End User Programme (corporate, SME and midmarket survey’s)
         SA IT Market Overview Sizing and Forecast
         SA IT Services Market Forecast and Analysis



     Contact (Sales Manager): Andries Lombaard 011 540 8000 andries@bmi-t.co.za www.bmi-t.co.za

     Contact (Author): Lesley-Anne Dos Santos 011 540 8000 lesley@bmi-t.co.za www.bmi-t.co.za



          BMI-TechKnowledge is the premier market intelligence and advisory firm in Africa, specializing in information, advisory and
          implementation services. BMI-T has some 15 analysts with expertise in telecommunications, IT, financial services, public sector,
          enterprise and consumer research. Increasing numbers of clients confidently base their decisions on the advice and information that
  we provide, because we understand their customers, the markets they target and the industries they operate in. Our wide ranges of services
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