South Africa’s total GDP is approximately R2.964-billion. The Internet economy, as a proportion of GDP, is therefore estimated to make up 2 percent of the South African economy. The result is that an Internet economy, worth R59-billion in 2011, could grow to as much as 2.5 percent of the economy by 2016.
The Internet Economic Impact Study, conducted by World Wide Worx (WWW) shows that at the end of 2011, South Africa had approximately 8.5-million Internet users. This represented no less than a 25 percent increase over the 2010 figure of 6.8-million, maintaining a high growth rate fuelled by the explosion of smartphones in the South African market. Consequently, with the number of Internet users having accelerated from 2008, the number of experienced users will begin accelerating in 2013, and will continue to do so for the following five years.
What is the Internet economy?
The Internet economy comprises access to and use of the Internet, investment in infrastructure and expenditure in Internet activity in a country. These include Internet infrastructure, money spent on online retail and online advertising, and business and Government engagement with the Internet.
The size of the Internet economy is not officially measured in South Africa, and has to be estimated based on a range of available expenditure measures. This is an indication partly of the lack of awareness of the significance of the sector, as well as the lack of maturity of Internet use in business and Government.
Business-to-Consumer (B2C) e-commerce comprises both traditional retail conducted in the online space and intangible products like air ticket sales, fulfilled online.
The total spent on online retail goods in South Africa in 2010 passed the R2-billion mark for the first time, growing by 30 percent to reach R2.028-billion. In 2011, this high growth rate was maintained, with a further 30 percent increase, to R2.636-billion.
More recently advertising for online shoes and fashion has hit mainstream television advertising which is an indication of the threat to traditional retail and the anticipated boon for warehousing and logistics.
The following figure from the report shows the Rand value of online retail each year since 1996 (it excludes travel, which is not traditionally classified as retail. However, online retail is dwarfed by the sale of air tickets online which have come close to the R9-billion mark, growing by 24 percent in 2011, suggesting it will pass the R10-billion level in 2012):
According to WWW's Goldstruck, SA is entering what he terms “the golden era” in which the build out of Internet infrastructure will reach a peak in the next few years.
The number of Internet users in SA is also expected to rapidly increase, stimulated in part by the smartphone explosion. World Wide Worx estimates true individual mobile penetration to be at about 80%, with 40 million South Africans using phones.
“These users represent the future potential of Internet growth in SA. Around 10 million phones are sold in SA every year, and it is expected that by 2013, smartphones will account for half of this number,” says Goldstuck. “Since smartphone users eventually become Internet users, we can expect the Internet user base to grow at an accelerated pace.”
The South African Internet economy is expected to grow to 2.5% (or R79 billion) of the GDP by 2016. “Looked at in another way, it is likely that over the next five years, the Internet economy will 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,” says Goldstuck.
