IT spending in Middle East, Turkey and Africa to wage modest recovery in 2019

Annual spending on technology infrastructure has nosedived in the last three years

$207m will be spent on artificial intelligence in Meta in 2019, says IDC. AFP

After three years of decreased spending on information and communications technology (ICT) in the Middle East, Turkey and Africa, more money is expected to pour into the sector in 2019 signaling a modest recovery and a renewed push for digital transformation, according to a new report.

"ICT and telco services [spending] contracted by around 2 per cent in 2018 … however, this year, we are expecting a year-on-year recovery by about 2.5 per cent” to $213 billion, said Jyoti Lalchandani, group vice president and regional managing director, META region, at Massachusetts-based researcher International Data Corporation (IDC), which issued its forecast on Wednesday.

IDC noted several regional headwinds – currency fluctuations, weak consumer demand and political uncertainties - are impacting the amount of spending on technology infrastructure in the region.

“META is going through currency fluctuations in different markets, we had it in Egypt in 2017 and it was followed in Turkey last year. Now we have elections coming up in Nigeria, South Africa and local votes in Turkey, adding more to the uncertainties in the market,” said Mr Lalchandani. Weaker consumer demand has adversely impacted spending on devices such as smartphones in particular, he added.

Estimates for 2019 are still hovering around 2016 levels and less than a peak in 2015 of $221bn.

In the region, telco services, like telephone lines and wireless signals, constitute 60 per cent of overall ICT spending with the remainder going to IT - including both hardware and software.

South Africa, which is expected to spend $14.7bn alone on IT services, will be the biggest spender in this segment in Meta, followed by Saudi Arabia ($11bn), Turkey ($8.3bn) and the UAE ($8bn).

“Growth will come in infrastructure (servers, storage and networks), services and software segments. Whereas hardware spending will continue experiencing contraction in 2019,” said Mr Lalchandani.

“Many factors like softer consumer demand, introduction of VAT and (fluctuating) disposable incomes has affected IT hardware spending.”

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One of the key drivers for ICT spending in Meta will be digital transformation initiatives to bring business and government initiatives online, with spending expected to surpass $25bn, up from nearly $20bn last year.

Saudi Arabia, the Arab world’s largest economy, will spend 1 per cent more reaching $34.5bn in 2019. Some of the major growth drivers are the adoption of new technology and government-driven initiatives like Vision 2030 and the Neom smart city mega-project.

“Global data vendors are investing in expanding data centre capacity in and around Saudi Arabia. We are also seeing IoT (Internet of Things) becoming more and more pertinent and this trend will continue in 2019,” said Hamza Naqshbandi, country manager for IDC Saudi Arabia.