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Growing at a rate of 50% per annum and fourth fastest growing cell phone market in the world, the South African GSM cell phone market has three operators: Vodacom, MTN and Cell-C.
With approximately 5.5 million installed fixed-line telephones, South Africa is ranked 23rd in telecommunications development in the world and represents more than 30% of the total lines installed in Africa. South Africa's transmission network of 156 million circuit-kilometers constitutes the backbone of all telecommunications services.
Telkom, the major fixed-line operator in South Africa, is a key player in a US$630m optical fiber undersea cable project that will cater for Africa's growing telecommunications needs for the next 25 years. Almost 40 nations and several international telecommunications operators have joined Telkom in the SAT-3/WASC/SAFE initiative, which will link African nations with Asia and Europe. The cable will be capable of transmitting 80 gigabits per second between two points.
Electronics industry revenues in South Africa exceeded R55bn in 2001 and continue to grow at levels well above the GDP growth rate. Key players in industrial, power, defence and telecoms electronics include Siemens, Alcatel, Ericsson, Altech, Grintek, Spescom, Tellumat and Marconi. With improved economic and regulatory conditions, and high levels of growth and activity in the African telecommunications market, South African companies are ideally situated to supply the growing demand for fixed and wireless telecoms equipment to the rest of the continent.
An established, highly competitive consumer electronics market producing high value-added electronic products has also played an important role, with South African exports rapidly growing beyond R4bn per annum. South African companies are world leaders in pre-payment, revenue management, and fraud prevention systems, and in the manufacture of set-top boxes, all exported successfully to the rest of the world. Other consumer products, such as small appliances, are rapidly growing exports to the EU.
The Gauteng region is responsible for approximately 60% of all revenues generated in the ICT sector, the Western Cape for approximately 20% of revenues. The remainder is generated by activities in other areas, with a significant hub in Durban, Kwa-Zulu Natal.
Incentives
A range of incentives is available to qualifying investments. The more commonly used incentives are given below:
| Name of Incentive | Benefit | Main conditions |
| Strategic Industrial Project | 50-100% tax allowance | Manufacturing and selected services, minimum investment of R50 million |
| Small and Medium Enterprise Programme | Cash grant of up to 10% of qualifying assets | Investments < R100m; benefit decreases with size of investment |
| Skill Support Programme | 50% of training costs, subject to a maximum of 30% of wage bill | Training programme must be certifiable |
| Support Programme for Industrial Innovation | 50% of the direct costs incurred in development | Development must be a significant technological advance and have commercial advantage over existing products |
Some of South Africa's competitive advantages in this sector are:
• Wireless Technology
South Africa has indigenous wireless technology. South African operators have the know-how to build GSM networks and related businesses. These technologies include financial transactions over mobile phones, systems integration, wireless LAN solutions and WAP services.
• IT skills
South African training institutions are emerging as popular and cost-effective choices. These training institutions are attracting talent from all over the world.
• Piloting new innovations
The diversity of the South African market, first world know-how in business and a developing country environment make it an ideal test lab for new innovations. Testing and piloting systems and applications are growing businesses in South Africa. Currently South Africa is pioneering pre-payment systems, vehicle tracking systems, air traffic control systems, and m-commerce systems.
• Platform for Infrastructure development and Application Hosting for Africa
The South African ICT products and services industry is well positioned to penetrate the African market. South African companies and South African-based subsidiaries of foreign companies have supplied most of the new fixed-line and cellphone networks that have rolled out in Africa in recent years. This market is growing fast as regulatory reform spreads in Africa. The communications infrastructure layers include hardware physical communications, server or switching, protocol and application layers. Profits in the cellular market have grown remarkably. South Africa's MTN is operating in five African countries beyond South Africa, namely Cameroon, Uganda, Rwanda, Swaziland and Nigeria. Vodacom was awarded Zambia's fourth mobile licence, and also entered the Democratic Republic of Congo, investing R370m to take over the operations of the Congolese Wireless Networks. Vodacom also operates in Lesotho, Tanzania and recently won the second GSM license in Mozambique.
• Time Zone
South Africa falls in the same time zone as Europe. This, along with English as the main language and competitive costs, makes South Africa very competitive in hosting international call centers. South African-based call centers now serve a growing number of major European companies, e.g. Mine Pearl and Lufthansa have call centers in Cape Town. Telkom has strategic alliances with international operators and thus capacity at various points around the world to serve their customers reliably and at a competitive price. The environment is improving still further as competitors in international telecom services launch their products in the current phase of managed liberalization.
For more information on doing business in SA and other enquiries, call us at +1.917.340.8987 USA, +27.82.420.4260 RSA or email info@azaniapr.com
Source: The Department of Trade & Industry