Boston, MA -- (SBWIRE) -- 10/01/2013 -- The rapid depreciation of the South African rand since the start of 2013 poses significant risks to the IT sector. We expect currency weakness to increase the cost of imported IT products and components, such as PCs, laptops, printers and servers. This development, along with downbeat business confidence, weak private consumption and the continuing decline in the sales of PCs, poses downside risks to our outlook for the computer hardware market in South Africa. However, the IT services segment is set to benefit from this currency weakness as the local business process outsourcing (BPO) industry becomes more price-competitive. We have, however, not altered our forecasts for the overall IT market in view of these developments as we expect continued government procurement to offset the likely shortfall in demand from businesses and consumers, at least in the short term.

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Headline Expenditure Projections

Computer hardware sales: ZAR38.89bn in 2012 to ZAR43.88bn in 2013, +12.8% in local currency terms. We retain the view that migration to Microsoft Windows 8 will provide a boost in 2013.

Software Sales: ZAR16.89bn in 2012 to ZAR18.60bn in 2013, +10.1% in local currency terms. Strong private consumption will drive growth, although this will be buffeted by the prevalence of piracy.

IT Services Sales: ZAR33.11bn in 2012 to ZAR34.39bn in 2013, +3.9% in local currency terms. We expect cloud computing and BPO services to drive the uptake of managed services and outsourcing. Risk/Reward Ratings: South Africa drops one place, to sixth position, in our Q413 MEA IT RRR table. South Africa's aggregate score of 57.6 is a slight decrease from our last update on the back of a weak Country Risk rating.

Key Trends And Developments

German datacentre operator Hetzner has begun construction of its new facility in Gauteng, South Africa. The new datacentre is part of a planned datacentre park to be built between Johannesburg and Pretoria, capturing the largest market for enterprise customers in the country. Datacentre services near Johannesburg are offered by a number of local players including telecoms

operators MTN, Vodacom and Neotel as well as local IT players such as Business Connexion. Hetzner will be one of a small number of international players entering the market there. Indeed, this is Hetzner's first datacentre venture outside Germany, highlighting the potential of the South African market for growth. With ambitious growth plans, seeing Hetzner building a datacentre park of five datacentres, the company clearly sees potential for strong growth and expects considerable demand.

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