Internet economy ‘2% of SA GDP’

28 May 2012

South Africa’s internet economy contributes 2 percent to the country’s gross domestic product (GDP), according to a new study. Moreover, this contribution is rising by around 0.1 percent a year, meaning it should reach 2.5 percent by 2016.

It has long been believed that South Africa has the largest internet economy in Africa. However, just how much of a contribution it makes to the overall economy has never been quantified – until now.

Conducted by research firm World Wide Worx, the economic impact study “Internet Matters South Africa” was commissioned by Google South Africa and released on Tuesday.

R59-billion in total internet spend

According to the report, the total spent by South African consumers, small businesses and the government on products and services via the internet, as well as on internet access and infrastructure, amounts to R59-billion.

“The biggest contributor to this slice of the economy is not, as is often assumed, the investment made in fibre and other data infrastructure by the mobile networks,” the report states. “Although this comes to R13.5-billion, it is surpassed by the amount spent on internet presence and access, at R29.2-billion.”

These two categories were followed by business-to-consumer e-commerce (B2C e-commerce), the biggest subsector in B2C e-commerce being South Africa’s airline industry, which has fully embraced e-ticketing and is rapidly migrating ticket sales online. In 2011, these sales came close to R9-billion.

South African e-commerce is growing at a rate of around 30 percent a year, according to the study, with the growth showing no signs of slowing down.

‘1.56-million jobs internet-dependent’

The SME Survey 2012, a separate survey of small and medium enterprises (SMEs) in South Africa, also conducted by World Wide Worx, found that 410 000 SMEs in the country have a website – representing 63 percent of active, formal SMEs.

“Approximately 150 000 SMEs in South Africa would not be able to survive without their web presence,” the survey found. “With SMEs accounting for about 7.8-million jobs in South Africa, this means as many as 1.56-million jobs would be in jeopardy were it not for the internet.”

This indirect economic impact will increase significantly in the coming years, according to World Wide Worx, fuelled by rapid growth in the number of internet users, stimulated partly by the smartphone explosion currently taking place in South Africa.

Mobile penetration stands at about 80 percent, the research indicates, with 40-million South Africans using mobile phones – representing the future potential of internet growth in the country.

“Around 10-million phones are sold in South Africa every year, and it is expected that, by 2013, smartphones will account for half of this number. Smartphone users, in turn, eventually become internet users, a trend that already began in South Africa in 2010.”

The ‘quiet engine’ of the South African economy

The result, according to the Internet Matters SA report, is that an internet economy worth R59-billion in 2011 and making up 2 percent of the South African economy will grow to as much as 2.5 percent of the economy by 2016.

Currently the largest sector of the economy, finance, real estate and business services, at R565-billion, makes up 21.2 percent of GDP, followed by manufacturing at 13.4 percent.

The report’s data puts the internet economy in 2011 as being almost as large as the agricultural sector, which made up 2.2 percent of GDP in the last quarter of 2011.

“Does this mean internet access has become as important as food? Hardly!”, says the report. “But other comparisons reveal its growing significance as a contributor to the economy: it will over time begin approaching the size of the construction sector (an estimated R120-billion in 2011), suggesting this is potentially one of the new building blocks of the South African economy.

“Given the fact that, for most organisations, the internet functions as an enabling tool for communications, collaboration and transactions, it could well be described as the quiet engine of the South African economy.”

SAinfo reporter