Technology Ecosystem in South Africa

"When you shoot a zebra in the black stripe, the white dies too." - Unknown

I would imagine that the Information Technology (IT) Ecosystem in South Africa is not much different in other parts of the continent (Africa) as such, to present a uniquely South African IT Ecosystem I shall look at the subject of black representation in the IT Ecosystem in South Africa.

Who's Who

The IT ecosystem in South Africa is split into different parts which can be structured and summarized as follows:

  • Medium to Large Multinational IT companies (mostly European, Asian and North American) based in South Africa.

  • South African and Non-South African IT products distributors. They are typically licensed by the multinationals and other local technology manufacturers or software development companies to “distribute” their products to South African resellers and in some cases to large corporate and government customers.

  • Large South African (publicly listed and private) IT Systems Integration companies who are most times the chosen “Premier” partners / Value Added Resellers (VARs) of the Multinationals mentioned above; e.g. Dimension Data, Business Connexion, Integr8, Datacentrix etc.

  • Small to Medium IT Solutions / VAR / Resellers who mostly buy and resell Multinational IT companies products and add their services to offer their customers more value and a unique selling proposition.

  • Technology and Internet Innovators and Startups, companies that develop their own technology and then sell it. This excludes “new” companies / startups that resell multinational technology as these can be classed as Resellers or VARs.

  • Non Profit Organisations involved in technology innovation and training. These involve technology hubs, some government sponsored technology innovation centers and other organisations involved in technology training and assisting technology startups. Government Departments and Parastatals involved directly in the development of policies for the IT sector and in some cases in the provision of IT services.

Now, looking at the ecosystem as described above I will attempt to answer the question of “black representation” in the sector. This is important considering South Africa’s Apartheid history as well as considering the country’s demographics.

First, we need to define what “representation” means and as such I have decided to look at it from the following points of view:

  • Ownership

  • Technical skills / Professionals / Engineers Representation (the guys who do the work)

  • Management Level representation, i.e. Chief Information Officers, Chief Technology Officers, IT Managers, etc.

Ownership

Medium to Large Multinational Companies – most are private companies and in the absence of more detailed information I assume the majority are foreign majority owned. Also, again in the absence of accurate data, anecdotal evidence suggests that they are among the largest “Technology Companies” in the country with regards to revenue.

Distributors – this is difficult to measure as you get some small technology products distributors, “below the radar”, and some large. So again, most being private, some are South African owned and some are not and you have some complying with general BEE codes, i.e. at minimum 25+1% ownership by “Previously Disadvantaged Individuals” (PDIs). Although this might be said to address the black ownership question, some of the equity deals are not as straightforward as they are reported to be. Oft times this ownership is “paper based” or vest over time, i.e. some of the ownership is not realized until such time the “BEE partner’s” dividend payouts, profit generated, sales generated have “paid” for his / her share ownership equivalent by a certain deadline.

Such agreements are private and models can differ and there are exceptions where the BEE partner has paid for (in full or part) in cash. So on paper, in order to get a “good” BEE scorecard, the ownership of most distributors is at 25.1% Black ownership.

Medium to Large System Integration Companies – very similar situation in ownership as distributors above as far as black ownership is concerned. There are exceptions in cases where some have been majority black owned from inception. Or in some cases have been black owned through acquisition.

Small & Medium IT Resellers and VARs – these are typically founder owned and managed and range in size from the micro (1 person) to medium sized. Black representation? Difficult to measure but one would imagine distributors and the vendors (multinationals) have a good idea of ownership of this “sector” of the IT ecosystem in South Africa as most are partners / resellers of their products and are registered with them. Also, there’s a lot of “churn” at the lower end (micro). A typical scenario is a professional resigns and re-contracts to previous clients but in a few years company closes shop, gets acquired etc.

Also, some are born as a result of a single opportunity identified based on personal relationships. At the lower end you get a lot of black owned companies, but they don’t turn over a significant amount of money, typically in the 1st three years just enough to take care of the owners needs, tend to subcontract most if not all work.

Technology and Internet Innovators and Startups - Given that there is always new Internet and Technology startups, it is difficult to measure participation based on the mentioned demographics. So, based on purely anecdotal evidence of startups who are getting attention both in the ecosystem and the media, it is interesting to note most startup activity (based on this criteria) geographically “appears” and can be perceived to be concentrated in the Western Cape, with a good number involved with the Silicon Cape Initiative.

Information Technology Professionals in South Africa

There’s a great representation of black people as far as IT professionals go. I don’t have the exact or estimate numbers at time of writing.

The best of these black IT professionals don’t only work for IT companies (e.g. Multinationals, System Integrators) but are also scooped up by large corporates, government and parastatals and they end up in their IT departments.

Typically, apart from their skills and experience, given South Africa’s Employment Equity guidelines and BEE guidelines, they come with the added “bonus” of improving a company’s BEE Scorecard. This is sometimessad, but true.

There’s also an interesting trend that is cyclical - albeit based on anecdotal evidence - currently the skills most black IT professionals are training in or getting certified in “business analysis” related, “process analysis”, “data analysis/ BusinessIntelligence”, “Business Process Re -engineering”, “IT Project Management” and similar.

The reasons why this is so could vary, it could be because of demand but there’s also a bit of “chasing the money” which to a certain extent explains why there aren’t so many “prominent” black owned technology startups since the bulk of those who could be innovating are “chasing the money”. Nothing wrong with this, just an observation.

I mention “chasing the money” because before the current trend of the above mentioned skills, there
was a great dea; of black professionals chasing the MCSE, Cisco Networking, SAP Consultant, basically
brand / product specific ICT certifications because that’s where it was perceived the “money was”.

PLEASE NOTE: This is anecdotal, although I believe it is relatively accurate.

So, as far as black professionals in IT go, they are there, majority are working in corporate and public sector South Africa.

Management

I separated “representation of black skills in management” from the technical skills portion because to get into IT Management you need to have had IT work experience and the situation is different here.

Again, there is relatively good black representation although in this area you get a lot of “pale males” once again because to be CTO, CIO IT Manager you need experience. What you also find with the Black IT Managers is a relatively high employee turnover rate whereby because the pool of these managers is relatively small, they tend to be changing jobs regularly as they seek better opportunities.

Challenges

The biggest challenge in my view (opinion) is politics.

Politics in the sense that despite BEE’s best intentions, it is indirectly hampering technology innovation and entrepreneurship amongst black IT professionals as given the choice between a good “secure” salary and challenging themselves to use their skills to solve problems or be enterprising, they go with the job.

Also, BEE hampers innovation indirectly amongst the resellers etc. in a sense that most of these companies adopt a “checkbox BEE” mentality whereby they ensure that they “check” all the correct BEE boxes on questionnaires and ensure that should a big corporate or government institution require to procure certain products / services they stand a better chance at getting that tender / contract.

So instead of focusing on “solving problems” using technology and innovating, the focus is now on “how do we win the tender / contract”. Nothing new is created because from a political policy point of view there is no incentive to innovate or be enterprising.

Business Connexion

The other challenge especially for black IT professionals and white IT professionals is a racial perception one. Black professionals believe their progress is stifled by “racist” white IT managers whilst white IT professionals have a perception that black IT professionals in South Africa are of a poor quality and sub-standard. Neither party deals with this perception challenge head-on, both groups huddle (anecdotal) in their own corners and continue to fuel these perceptions.

Potential Solutions

Provide incentives for technology entrepreneurship and innovation, this has to come from government. Forget BEE scorecards focused on ownership etc. but include incentives for innovation and new technology startups.

Government being the largest IT buyer of hardware and software in South Africa it must be open to then buy “MADE IN SOUTH AFRICA” IT products. Not only provide incentives, but lead by example and buy the products aslong as they are good and can compete with the best in the world.

Once the focus is shifted from ownership scorecards perhaps then many black startups will start to shift their focus from “chasing tenders and contracts” to developing products that solve problems and then selling those products.

As far as the challenges around professionals go and what needs to be done, no one can dictate what a private company must do beyond the guidelines that are already available around affirmative action and BBBEE. This then boils down to each individual having an open and re-conciliatory mind and willing to accommodate the other whilst not losing focus of business goals.

Early training of youth in Science, Maths and Programming similar to what Non Profit. This addresses the skills shortage and in turn addresses the issue of not enough in-country technology skills available for employment in the long term.

The above is by no means a definitive guide of the Information Technology Ecosystem in South Africa but rather an attempt to put all the IT role players into a structure that represents an ecosystemfor all observers and those actively involved in the ecosystem to understand.

As such, comments, corrections and additions are welcome and encouraged as it will be updated periodically to reflect the changing ecosystem. Also, this is limited to Information Technology and excludesthe Telecommunications part.

Image Credit: BCX Blog

Cover Image Credit: Erwin T

Comments