African IT market to remain under pressure throughout 2020

Nov 22, 2019

The IT market in sub-Saharan Africa looks set to remain under pressure throughout 2020 as enterprise customers trim their spending in the face of market uncertainty. Resellers that want to drive growth in this market will need to focus on the emerging opportunities in the cloud space.

That’s according to Johannes Groenewald, general manager at Tarsus Distribution,  who says that a combination of global market volatility and localised conditions such as elections in key African markets have seen many government and corporate IT users cut back on their spending.

Resellers that want to prevail in this environment are needing to find new ways to add value, such as becoming more consulting-led in their sales approach and working with clients to help them rearchitect their IT environments for the move to the cloud, adds Groenewald.

“Between the volatility of emerging market currencies this year, growing fears that the global economy is slowing, and elections in many of our key markets, many organisations are taking a cautious approach to IT spending,” he says. “We expect this trend to continue well into 2020.”

Groenewald says many governments across Africa have deferred IT projects ahead of or following elections, contributing to a softer market. In addition, many organisations have reduced day-to-day IT spending in an effort to harvest cost-savings. “The market is maturing, so we are seeing many enterprises take a more sensible approach to procurement,” he says.

Against the backdrop of high operating costs, currency volatility and growing competition, many enterprise IT users in sub-Saharan Africa are finding other ways to tighten their belts. For example, there is a growing trend among organisations to prolong the lifespan of IT assets beyond the traditional three to five years.

No more forklift upgrades

Rather than forklift upgrades, many organisations are replacing equipment and software only when it is essential to do so; some are also repurposing and reassigning old hardware rather than retiring it. “There’s a definite trend towards sweating assets, especially as organisations start to think about how they should bridge to the cloud,” Groenewald says.

The channel is also coming under pressure from parallel IT product imports, which have surged in many southern African markets over the past two years. Many resellers and end-users are purchasing products from international ecommerce sites rather than through the official channels, according to Groenewald.

“This could do lasting damage to the channel,” he adds. “With fewer resources in-market in some countries, vendors are not monitoring and managing the grey market as effectively as they did in the past. This challenge can only be addressed through cooperation between valued-added distributors and their suppliers.”

Opportunities in the cloud

Looking to 2020, Groenewald anticipates that the most exciting opportunities will come from the cloud. “In some countries, we’re seeing service providers invest heavily in data centre infrastructure because government entities and other large organisations are insisting that their data is hosted in country,” he adds.

“In the mid-market, the cloud is also a high-growth area. Vendors are looking to partner with value-added distributors to provide the resellers with the technical expertise and support they need to sell cloud solutions. Our starting point is to advise the market about the right technology, infrastructure and architecture to adopt.”