SA SME and Midmarket ICT Market Sizing and Forecast (June 2009)

SA SME and midmarket ICT
market sizing and forecast

report
(Report Code: 1289)
Analysts: Tertia Smit, Sheldon Neilson, Penny Smith
Date: June 2009
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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 -I- 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 - II - 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 - III - 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 - IV - 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 -V- 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 - VI - June 2009

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
Top 350,
9,919,456, 10%
Corporate,
12,714,535,
12%
Residential,
56,046,000 ,
55%
SME and
Midmarket,
23,769,776,
23%
Source: BMI-T, 2010
© BMI-TechKnowledge Group, 2009 -1- May 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
Other Data,
7,841,000 , 8% Fixed Voice,
24,301,000 ,
24%
Internet,
5,299,768 , 5%
Mobile,
65,008,000 ,
63%
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.

Figure 3
Enterprise telecoms market by service type, (R'000) 2008
Other Data,
7,841 , 17%
Fixed Voice,
17,601 , 38%
Mobile, 17,214 ,
37%
Internet, 3,748 ,
8%
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.

Figure 4
Annual telecoms spend in all service categories ,(R'000) 2008
20,000,000
18,000,000
16,000,000
14,000,000
12,000,000
10,000,000
8,000,000
6,000,000
4,000,000
2,000,000
-
Fixed Voice Internet Mobile Other Data
Corporate Total SME Total

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
Other Data,
2,010,233 , 8%
Fixed Voice,
9,654,503 , 41%
Mobile,
9,900,502 , 42%
Internet,
2,204,539 , 9%
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
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
Residential,
4,677,426 , 7%
Top 350,
20,166,245 , 31%
SME and
midmarket,
17,568,836 , 27%
Corporate,
22,663,493 , 35%
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
Services, 23,911,000
, 37%
Hardware,
29,703,000 , 46%
Software,
11,462,000 , 17%
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%).
Figure 8
Overview of total enterprise IT market spend by service category, (R'000) 2008
Services,
17,940,632 , 38% Hardware,
20,679,680 , 44%
Software,
8,186,818 , 18%
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
Services,
5,316,507 , 30%
Hardware,
8,949,618 , 51%
Software,
3,302,712 , 19%
Source: BMI-T, 2009

2. MARKET DEFINED
This SA ICT SME and midmarket market
arket sizing and forecast report
eport is a module of SA ICT
Converged End User Programme me,, where we analyse the enterprise IT and
telecommunications
elecommunications customer trends, size the markets and
and forecast the growth to 2013.
SA ICT Converged End User Programme

Program
The SA ICT Converged End User Programme
Program not only covers an overview of the SME,
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-TT 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
nternet access, core data services, IPVPN and adoption of
alternative voice services. From an IT point of view,
view topics such as IT business solutions,
emerging technologies, security, IT brands used, Web 2.0 and business continuity
continuity are
covered.
The suite consists
nsists of the following reports:
Figure 10
SA ICT Converged End User Programme
Source: BMI-T, 2009
Methodology
This SA SME ICT market sizing and forecast report is based on a holistic model of the
composition of the SME and midmarket
midma sector, and their spending patterns, formulated
from primary research inputs:
profile of the SME and midmarket customer base from BMI-TT databases and
other secondary sources
spending patterns, based on BMI-T's

BMI 2009 IT and telecoms end user surveys
revenues
enues are tied back to reported numbers for the given product/service type

excluded are interconnections fees, wholesales services, capex and equipment
spend and services, ICT salaries or ICT intermediary consultants or reseller
markups
Research components
The research includes a market sizing and forecast model. The four key components of the
research, as reflected in the report's chapter structure, are:
number
umber of business customers in each size category, segmented by key vertical
market sector
adoption levels
vels of various technologies and services within the SME and
midmarket sectors'' customer base
the 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
overall IT and telecoms spending levels and growth trends in each service
category including forecasts to 2013
201
resultant
esultant revenues and forecast growth rates segmented by major product or
service category
The figure below illustrates how BMI-T

BMI has combined the customer groups into two the
categories, each with the own sub segments.
Figure 11
BMI-T
BMI customer segmentation
Source: BMI-T, 2009

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
60.0%
53%
50.0%
40.0% 34%
30.0%
20.0%
10%
10.0%
3%
0.1% 0.3%
0.0%
Top 350 More than 200 to 999 51 to 199 11 to 50 2 to 10
1000
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.
© BMI-TechKnowledge Group, 2009 - 10 - May 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
Industry
SIC code Subdivisions covered
classification
1 Agriculture, hunting, This sector includes the growing of crops and farming of animals, hunting and
forestry and fishing game farming, forestry and logging and inland, coastal and ocean fishing and
fish farming.
2 Mining and Mining includes underground and surface mines, quarries and the operation of
quarrying 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 This sector looks at electricity, gas and water supply. It includes the generation,
water 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 includes the media, broadcasting and telecommunications.
communication and Logistics can be described as the synchronisation and use of people, transport,
logistics 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
Industry
SIC code Subdivisions covered
classification
8 Financial This sector includes the organisations and professions as specified below. Some
intermediation, overlap occurs with other sectors. This sector has close synergies chiefly with
insurance, real sector 7 (transport, storage, logistics, communications), sector 9 (government,
estate and business community, health, education, gaming), and sector 6 (wholesale and retail
services 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, Public administration and defence activities, activities of central government,
community, health, regional and local authorities, all educational services, all health and social
social and personal work activities, other community, social and personal service activities.
services
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
More than
2 to 10 11 to 50 51 to 199 200 to 999 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
Electricity, Gas and Water

Media and Communication
Mining and quarrying
Transport, storage and logistics
Catering, Accommodation and other trade
Agriculture
Wholesale trade, commercial agents and allied…
Construction
Government and personal services
Manufacturing
Retail and Motor trade and repair services
Financial, business and other services
0 100,000 200,000 300,000 400,000 500,000 600,000
2 to 10 11 to 50 51 to 199 200 to 999 More than 1000 Top 350 Total
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

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
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
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 % q/q % annual % annual % annual
change change change change 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
More than
2 to 10 11 to 50 51 to 199 200 to 999 Top 350 Total
1,000
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
Agriculture
Mining and quarrying
Manufacturing
Electricity, gas and water
Construction
Retail and motor trade and repair services
Wholesale trade, commercial agents and allied…
Catering, accommodation and other trade
Media and communication
Financial, business and other services
Healthcare
Education
National government
Provincial and local government
Other personal services
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
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
Agriculture
Top 350 Mining and quarrying
Manufacturing
More Electricity, gas and water

than
1000 Construction
Retail and motor trade and repair

services
200 to Wholesale trade, commercial agents
999 and allied services
Catering, accommodation and other
trade
51 to 199
Media and communication

services
11 to 50 Healthcare
Education
National government
2 to 10
Provincial and local government
Other personal services

0% 20% 40% 60% 80% 100%


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
CAGR 08-
2008 2009 2010 2011 2012 2013
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
80,000,000
70,000,000
60,000,000
50,000,000 34,143,947
31,714,095
29,394,856
40,000,000 27,253,858
25,499,406
23,769,776
30,000,000
20,000,000
31,081,445 33,780,779
24,389,595 26,288,568 28,586,645
10,000,000 22,633,991
-
2008 2009 2010 2011 2012 2013
Corporate SME and midmarket

Source: BMI-T, 2009

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
2 to 10,
2,099,512 , 9%
51 to 199,
8,788,300 , 37%
11 to 50,
12,881,965 , 54%
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.

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
Other data ,
2,010,233 , 8%
Fixed Voice ,
9,654,503 ,
41%
Mobile ,
9,900,502 ,
42%
Internet ,
2,204,539 , 9%
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
Fixed Voice
Internet
Mobile
Other data
- 4,000,000 8,000,000 12,000,000
2 to 10 11 to 50 51 to 199
Source: BMI-T, 2009

Figure 21
SME and midmarket telecoms spend by organisation size and service type, 2008
51 to 199
11 to 50
2 to 10
- 5,000,000 10,000,000 15,000,000
Fixed Voice Internet Mobile Other data

Source: BMI-T, 2009

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
CAGR
2008 2009 2010 2011 2012 2013
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
18,000,000
16,000,000
14,000,000
12,000,000
Fixed Voice
10,000,000
Internet
8,000,000 Mobile
6,000,000 Other data
4,000,000
2,000,000
-
2008 2009 2010 2011 2012 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.

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%
Total 23,769,777 25,499,406 27,253,858 29,394,856 31,714,095 34,143,947 7.5%
Source: BMI-T, 2010
Figure 23
Total SME and midmarket telecoms spend by customer segment, 2008-2013
20,000,000
18,000,000
16,000,000
14,000,000
12,000,000
2 to 10
10,000,000
11 to 50
8,000,000 51 to 199
6,000,000
4,000,000
2,000,000
-
2008 2009 2010 2011 2012 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.

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
6,000,000
5,000,000
4,000,000
2 to 10
3,000,000
11 to 50
2,000,000 51 to 199
1,000,000
-
2008 2009 2010 2011 2012 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%
Total 2,204,539 2,730,833 3,256,532 3,869,477 4,507,584 5,192,799 18.7%
Source: BMI-T, 2010

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
3,500,000
3,000,000
2,500,000
2,000,000 2 to 10
1,500,000 11 to 50
51 to 199
1,000,000
500,000
-
2008 2009 2010 2011 2012 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%
Total 9,900,502 10,996,920 12,125,202 13,383,753 14,716,974 16,095,407 10.2%
Source: BMI-T, 2010

Figure 26
SME and midmarket forecast analysis by customer segment and mobile services spend,
(Rm) 2008-2013
10,000,000
9,000,000
8,000,000
7,000,000
6,000,000 2 to 10
5,000,000
11 to 50
4,000,000
51 to 199
3,000,000
2,000,000
1,000,000
-
2008 2009 2010 2011 2012 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%
Total 2,010,232 2,288,158 2,606,256 2,981,576 3,377,086 3,811,757 13.7%
Source: BMI-T, 2010

Figure 27
SME and midmarket forecast analysis by customer segment and other data spend, (Rm)
2008-2013
2,500,000
2,000,000
1,500,000
2 to 10
11 to 50
1,000,000
51 to 199
500,000
-
2008 2009 2010 2011 2012 2013
Source: BMI-T, 2009

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
Total 26,740,225 10,559,900 23,098,450 60,398,575
Source: BMI-T, 2010

Figure 28
Overall IT spend by customer segment and IT services category, 2008 (R'000)
SME and midmarket
Corporate
- 10,000,000 20,000,000 30,000,000 40,000,000 50,000,000
Hardware Software Services

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.

Figure 29
Total SME and midmarket IT spend by customer segment, (Rm) 2008
2 to 10,
806,688 , 5%
11 to 50,
5,713,972 , 32%
51 to 199,
11,048,177 ,
63%
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'.

Figure 30
SME and midmarket IT spend by service type, (R'000) 2008
Services,
5,316,507 , 30%
Hardware,
8,949,618 , 51%
Software,
3,302,712 , 19%
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
Total 8,949,618 3,302,711 5,316,506 17,568,835
Source: BMI-T, 2010

Figure 31
Total SME and midmarket IT spend by category and customer segment, (Rm) 2008
Services
Software
Hardware
- 2,000,000 4,000,000 6,000,000 8,000,000 10,000,000
2 to 10 11 to 50 51 to 199
Source: BMI-T, 2009
Figure 32
Total SME and midmarket IT spend by customer segment and service category, (Rm) 2008
51 to 199
11 to 50
2 to 10
- 2,000,000 4,000,000 6,000,000 8,000,000 10,000,000 12,000,000
Hardware Software Services

Source: BMI-T, 2009

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%
Total 17,568,837 17,827,544 19,062,433 20,346,102 21,654,892 22,929,287 5.5%
Source: BMI-T, 2010
Figure 33
Total SME and midmarket IT spend by service category, (Rm) 2008-2013
12,000,000
10,000,000
8,000,000
Hardware
6,000,000
Software
Services
4,000,000
2,000,000
-
2008 2009 2010 2011 2012 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.

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
CAGR 08-
2008 2009 2010 2011 2012 2013 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%
Total 17,568,837 17,827,543 19,062,432 20,346,102 21,654,893 22,929,288 5.5%
Source: BMI-T, 2010

Figure 34
SME and midmarket overall IT spend forecast analysis by customer segment, (Rm) 2008-
2013
16,000,000
14,000,000
12,000,000
10,000,000
2 to 10
8,000,000
11 to 50
6,000,000
51 to 199
4,000,000
2,000,000
-
2008 2009 2010 2011 2012 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
CAGR
2008 2009 2010 2011 2012 2013 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%
Total 8,949,618 8,416,873 8,827,048 9,173,668 9,508,601 9,772,908 1.8%
Source: BMI-T, 2010
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.

Figure 35
SME and midmarket IT hardware forecast analysis by customer segment, (Rm) 2008-2013
6,000,000
5,000,000
4,000,000
2 to 10
3,000,000
11 to 50
2,000,000 51 to 199
1,000,000
-
2008 2009 2010 2011 2012 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
CAGR 08-
2008 2009 2010 2011 2012 2013 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%
Total 3,302,711 3,549,219 3,802,921 4,089,519 4,370,440 4,650,048 7.1%
Source: BMI-T, 2010
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.

Figure 36
SME and midmarket IT software forecast analysis by customer segment, (Rm) 2008-2013
3,500,000
3,000,000
2,500,000
2,000,000 2 to 10
1,500,000 11 to 50
51 to 199
1,000,000
500,000
-
2008 2009 2010 2011 2012 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
CAGR 08-
2008 2009 2010 2011 2012 2013 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%
Total 5,316,506 5,861,452 6,432,465 7,082,915 7,775,850 8,506,332 9.9%
Source: BMI-T, 2010
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.

Figure 37
SME and midmarket IT services forecast analysis by customer segment, (Rm) 2008-2013
7,000,000
6,000,000
5,000,000
4,000,000 2 to 10
3,000,000 11 to 50
51 to 199
2,000,000
1,000,000
-
2008 2009 2010 2011 2012 2013
Source: BMI-T, 2009

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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.
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SA SME and midmarket ICT

market sizing and forecast

Check us out on the World Wide Web!

Trademarks are implicitly acknowledged..

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

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

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

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

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

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

The telecommunications market in SA

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

Source: BMI-T, 2010

The total enterprise telecommunications market spend

© BMI-TechKnowledge Group, 2009 -2- May 10

© BMI-TechKnowledge Group, 2009 -3- May 10

Corporate Total SME Total

The SME and midmarket telecommunications spend

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

© BMI-TechKnowledge Group, 2009 -5- May 10

Source: BMI-T, 2010

Source: BMI-T, 2010

The enterprise IT market spend

Source: BMI-T, 2010

The SME and midmarket IT spend

Source: BMI-T, 2009

© BMI-TechKnowledge Group, 2009 -7- May 10

SA ICT Converged End User Programme

Source: BMI-T, 2009

spending patterns, based on BMI-T's

© BMI-TechKnowledge Group, 2009 -8- May 10

The figure below illustrates how BMI-T

Source: BMI-T, 2009

© BMI-TechKnowledge Group, 2009 -9- May 10

BMI-T business customer classification and StatsSA market classification

The Top 350 telecommunications spenders

company size by number of employees and by annual turnover

company size by vertical sector that are technology intensive

© BMI-TechKnowledge Group, 2009 - 11 - May 10

© BMI-TechKnowledge Group, 2009 - 12 - May 10

Number of companies by vertical sector and company size

© BMI-TechKnowledge Group, 2009 - 13 - May 10

Electricity, Gas and Water

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

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

Source: Stats SA, BMI-T, 2010

Telecoms service type categories

mobile voice and data

spending with cellular service providers and LCR operators

© BMI-TechKnowledge Group, 2009 - 14 - May 10

other sectors – managed data network services

provided over leased lines like VPNs

IT product and service type categories

system infrastructure software

Deployment and support

Market sizing and forecasting

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

© BMI-TechKnowledge Group, 2009 - 15 - May 10

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

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

Apportionment of ICT revenue to company size categories and vertical sectors

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

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