Day 1 C2C Summit July 2016 - Government Support for ICT Development, Success strategies

1. Headline Verdana Bold
Government Support for ICT Development,
Success Strategies
Connect 2 Connect 2016, Pretoria, South Africa
Sharoda Rapeti
19 July 2016

2. What my presentation will cover
WHAT
is the role of
Government to
advance ICT
development and
grow country
competitiveness?
1 WHAT
are the positive
& negative
implications of
Government
actions/ lag in
actions to
enable and
grow the ICT
industry?
2
HOW
does the ICT
industry
contribute to
GDP?
3
CASE
STUDIES
4

3. Factors that play a major role in shaping and enabling the strength of the ICT industry
Inter-Government support
• Tax incentives
• Ability to attract FDI
• Co-development of policies e.g. M2M, security
etc
• Digital Government
• Creation of SEZs, IDZs
• Immigration
• Drive IoT solutions across Smart Cities based
programmes e.g. transport, safety, education,
housing, health etc
Legal and Regulatory
• Access to spectrum
• Competitive industry
• Avoid duplicate
infrastructure investment
• Pricing
• Network security, Data
Security and Privacy
• Labour legislation
Infrastructure
• Spectrum
• Open Access Networks
• Metro, Provincial, National and
International Infrastructure
• Cost of Infrastructure
• Non-telco infrastructure e.g.
electricity, housing, roads,
airports
• Broadband Network Ownership
model
Government Support (ICT)
• Political and economic
stability
• Development of policies
• R&D spend
• Digital Government
• Network security, Data
Security and Privacy
• Job creation in primary and
secondary industries
Future Talent Pool
• Forecast and develop skills to support the 4th
Industrial Revolution/ (digital disruptors)
requirements
• Understand trends of Millennials in the workplace
• Establish skills base of legacy skillsets and
demographic of skills base
• Innovation demands new, rare skills e.g. user
experience design, security, IoT/M2M, cloud, AI
and data analytics
Cost of Telecommunications
• Cost of local and global
connectivity
• Cost of data / IP based
services
2

4. o The South African BPO industry accounted for 1% of the global BPO revenue
in 2014
o Revenues from South African BPOs is forecast to account for 4% of the global
revenue by 20301
o The number of jobs in South Africa to serve global clients increased by 23%,
from 21,700 in 2014 to 26,700 in 2015
o The most sought after service is from the Financial Services Industry vertical
i.e. finance, actuarial science and accounting skill sets accounting for ~50% of
the market
o The South African BPO industry contributes ~R50m to the national GDP p/a and employs
~ 215,000 people4
o Three South African cities feature in the Top 100 outsourcing destinations3:
• Johannesburg #20
• Cape Town #56
• Durban #100
South Africa has been able to position itself as an emerging offshoring destination
Cost vs Maturity (sized by labour pool)2
Maturity
Labourcostratio(US=100)
1. Source: Deloitte Cost Competitiveness – no longer the only differentiator for the BPO industry – July 2016, 2. Source: Gartner (February 2016), 3. Source: Mckinsey Study – South Africa’s big five bold priorities for inclusive
growth 4. Source: Business Process Enabling South Africa (BPeSA)
KEY HIGHLIGHTS1
South Africa is categorised as a Primary
Outsourcing Location (overall value, cost and risk)
Russia, Belarus and Egypt offer lower rates, but
present higher risks for Intellectual Property
protection, legal maturity, security and ease of doing
business
South Africa and Egypt excel at BPO services
particularly in Call Centres
Russia and Belarus specialise in software development
and Poland, Hungary, the Czech Republic, Bulgaria and
Romania are well suited for Multifunction Delivery
Centres.
3

5. Language
GovernmentSupport
LabourPool
Infrastructure
EducationalSystem
Cost
Political&Economic
Environment
CulturalCompatibility
APAC
Region
China 5 7 5 7 6 7 6 5
India 8 9 9 5 7 8 8 7
Malaysia 8 7 6 7 6 7 6 6
Sri Lanka 6 6 4 4 5 7 5 5
Vietnam 5 5 6 5 5 8 5 5
Americas
Region
Argentina 6 3 3 5 6 8 3 6
Chile 4 7 3 6 6 7 7 7
Colombia 5 7 4 6 4 7 6 7
Costa Rica 6 7 5 5 5 8 8 7
Mexico 6 7 7 6 4 6 6 8
GlobalandLegal
Maturity
4
5
6
5
4
3
7
6
5
7
Data/IPSecurityand
Privacy
3
5
6
4
2
4
4
4
4
4
Language
GovernmentSupport
LabourPool
Infrastructure
EducationalSystem
Cost
Political&Economic
Environment
CulturalCompatibility
EMEA
Region
Bulgaria 5 5 4 6 5 6 6 8
Czech
Republic
6 6 5 7 7 5 7 8
Egypt 4 5 4 4 6 7 3 4
Hungary 5 6 4 7 4 5 7 8
Poland 7 7 6 7 6 5 7 8
Romania 6 5 4 6 5 5 6 8
Russia 4 5 5 6 5 8 3 4
South
Africa
9 6 4 5 4 5 4 9
GlobalandLegal
Maturity
6
7
4
7
7
6
3
6
Data/IPSecurity
andPrivacy
5
7
4
7
7
5
3
4
………but needs to do more to achieve growth……….
Source: Gartner - Evaluate Offshore/Nearshore Countries for Outsourcing, Shared Services and Captives
Worldwide 2016 (February 2016)
Most Eastern European countries are growing their service export industries
by 10% - 15% annually
Governments have set up new Technology Parks, offer financial incentives
to employers and employees and encourage universities to produce STEM
graduates
4

6. Talent shortage is a major hurdle to sustainability and growth of US companies1
3.4 million
Manufacturing jobs are
likely to be needed over
the next decade.
2.7 million
Baby Boomer retirements
700K manufacturing jobs
expected from economic
expansion.
Only 1.4 million
Jobs are likely to be
filled.
An expected
2 million
Manufacturing jobs
will remain unfilled
due to the skills gap.
The US skills gap is widening
The implications are significant
Every job in manufacturing creates another 4.6
new jobs throughout the entire economy
For every $1 invested
in manufacturing,
another $1.37 in
additional value is
created in other sectors
Other advanced nations such as Japan,
Germany and South Korea face far more
severe demographics challenges that in the
US
The younger population segment (15 to 39 years) as a
share of total population across all major nations is in
decline.
By 2030, other nations like Japan, Germany and South
Korea will have a higher proportion of aged population
(65+ years) than in the US.
“Ageing of engineering and manufacturing workforce,
without appropriate knowledge transfer will exacerbate
skills shortage…….” Executive interview – US Manufacturing firm
Share of Younger Population
(15-39 years) in Total Population
Share of Older Population
(65+ years) in Total Population
China
613
South Korea
554
Japan
536
Germany
514
US
481
Math PISA Score*
China
580
Japan
547
South Korea
538
Germany
524
US
497
Science PISA Score*
1. Source: Manufacturing and Innovation - Deloitte and US Council on Competitiveness (May 2016)
*Program or International Student Assessments (out of a total of 1,000) Source: National Center for Education Statistics 5

7. South East Asia – setting up at regional level for manufacturing success
Governments across the region developed an understanding of their electronics
manufacturing industries’ needs ~ 3-4 decades ago, resulting in the right steps being
taken to create enabling environments for the manufacturing industry
6

8. Africa – latent potential to establish a globally competitive manufacturing region
Source: SADC: Integrated Paper on Recent Economic Developments in SADC – please note data is dated and an excerpt from a 2015 study: Gauteng Provincial Government Local Manufacturing Feasibility Study. To size the
opportunity for electronics manufacturing in SA and Gauteng, 2014 trade, GDP and manufacturing output data was used.
With a rapidly growing middle class, SSA countries can increasingly look to take
advantage of domestic markets whilst targeting export markets as well
Automotive Avionics and
aerospace
General electrical
sub-components
Energy-saving technologies
Radar
Power electronics Consumer electronics
Telecommunications Medical devices
Lighting
Information Technology
Sizing of local manufacturing
opportunity in South Africa:
~R189 billion for South Africa
~ R61 billion for Gauteng
Province
7

9. 8
8

10. Case studies

11. Case Study 1: Australia’s Digital Pulse
This report was prepared solely for the
Australian Computer Society (ACS) by
Deloitte Access Economics (DAE).
The report was compiled for the purpose
of analysing the digital economy,
workforce and skills.
Other
industries
179900
Financial
Services
40277
Public
Administration
43760
ICT-related
Industries 298236
Professional
Services
66637
ICT workers by selected industries, 2015
• The contribution of digital technologies to the Australian economy is
forecast to grow from $79 billion in 2014 to $139 billion in 2020.
• This represents growth of over 75% and an increase in the digital
economy from 5% to 7% of Australia’s GDP.
• The vast majority of this growth (97%) is expected to take place in
sectors outside of the traditional ICT industry.
• This growth will be fuelled by new waves of technological
developments where a large source of future digital disruption will
be the new technologies that are now emerging e.g. commercial
applications in the future – such as 3D printing in manufacturing,
drones in the construction industry and driverless vehicles on
mining sites.
CURRENT WAVE OF DIGITAL DISRUPTION
Mobile AnalyticsWebContentSocialCloud
FUTURE WAVE OF DIGITAL DISRUPTION
Artificial
Intelligence
Genomics
Crypro-
currencies
Internet
of Things
Electric and
connected cars
$
Connected
home
Mobile
payments
Oculus
rift
Drones
Robotics 3D printingWearables
2014 2020
$13Bn
$66Bn
$15Bn
$123Bn
$79Bn
$139Bn
3Within ICT industry Outside of ICT industry
10

12. Case Study 2: cellnex (ex Abertis Telecoms)
Abertis is currently a leading international
group of toll-road operators, managing
thousands of kilometers of high quality, high
capacity roads and toll roads globally.
Abertis has a market cap of ~€14Bn and
owns 57% of Hispasat with a fleet of 7
satellites. As at Q1 2016, more than 70% of
it’s EBITDA came from outside Spain.
Abertis owned Abertis Telecoms (now
cellnex), a telecommunications
infrastructure operator with headquarters in
Barcelona, Spain. The company has a range
of products and took the opportunity to
acquire signal distribution infrastructure at a
point when telecommunications companies
were struggling and legislation allowed the
companies to merge.
Abertis Telecoms (now cellnex)
infrastructure includes:
• DTT and Radio network;
• IP Data Network;
• Transport;
• Mobile radio communications; and
• Sea rescue networks
Abertis disposed of Abertis
Telecoms as part of its strategy to
focus on
toll roads.
Key History Company and Financial Performance Highlights
2015 - cellnex IPO: Highly subscribed at top of the range. Value
crystallisation exceeded expectations with ~€2.7Bn capital gains
2015 – 8% organic growth achieved through new PoPs being able to
drive multi-tenancy with 4G rollout, closing coverage gaps and through
network densification strategy. cellnex was also a key beneficiary of
European consolidation through value accretive acquisitions
Q1 2016 – continued organic growth through increased multi-tenancy
and infrastructure rationalisation. The company plays a strong
industry leadership role to achieve operating synergies as a value
creation driver for its shareholders and to fulfil national ICT vision and
regulatory objectives for Spain.
• Cellnex continues to evolve from management of passive
infrastructure to providing innovative value-added services, e.g.
entered into a 8-year contract with Barcleona City Council to sell
co-location services for Small Cells throughout the city.
• Cellnex also concluded an Agreement with Sigfox for the
deployment of the first global IoT network in Spain.
cellnex is now the 25th largest Spanish company in terms of market
cap as of FY 2015/6 year end (c.€4Bn) with ~ 15 000 network sites
Growth through Innovation
2016
20 June, Cellnex Telecom (CLNX: SM) joined the IBEX® 35 Index.
The IBEX 35 Technical Advisory Committee approved Cellnex
Telecom’s inclusion in the benchmark index of Spain’s stock
exchange, the IBEX® 35.
2015 Business Performance
Revenues (€Mn) Adjusted EDITDA (€Mn)
11

13. Case Study 3: Korea Telecoms
2010
KT Group decided to form a property business by establishing a new subsidiary “KT Estate Ltd.” KT retained core property deemed essential to manage it’s telco business
and handed over 99 properties to KT Estate. This was effectively to be used as the ‘seed capital’ to buckle down the KT Estate business.
As at December 31, 2015 KT Estate total assets and revenue for FY 2015 amounted to ~USD 1.5 billion and USD 300 million respectively
KT Estates’ primary business consists of three types:
1) property rentals,
2) real estate management including inter-companies’ property as well as for third parties, and
3) development of its property e.g. property refurbishment, new developments, domestic housing development and a range of Smart City initiatives
₩
revenue
KT Estate Ltd. founded in 2010
2011: KT 2 step migration office
development project management;
Busan Logistics Centre and
apartment development
2012: Enforcement of KT-KT Estate
asset management business.
Founded KD Living Kay Realty business
2013: Achieved ISO 14001 certification
- international environmental
management standard
Conducted KT asset portfolio
diagnostics
Achieved credit rating A+ (stable)
2014: Commenced Brass Housing
Development Projects
Commenced
Yeongdeungpo rental housing
construction
Data Centre expansion projects
2015: Replacement of ageing security
solutions in Andong
KT real estate portfolio diagnosis and
Strategy consulting
Signed up Home Repair business
agreement
KT Estate Ltd. Core offerings: (1) consultancy services, (2) planning and design services and solutions, (3) real estate finance (Project Financing),
(4) construction management, (5) marketing, (6) leasing and management of real estate products to offer the best value to customers
KT Corp. launches new housing brand, expands real estate business – March 2016
• KT Estate recently launched its very own rental housing brand called Remark Vill and through this move intends on becoming
a leading provider of rental apartments. The brand name is a combination of “Remaking Value,” “Remarkable Life,” and
“Real Landmark.”
• KT Estate is planning to provide a total of 2,231 rental houses across four regions as part of the Remark Vill project
development.
• 2012 - KT Estates set up a JV viz.; KD Living with Japan’s rental housing management firm Daiwa Living Co. KT owns 51% of
KD Living , with Daiwa holding the remaining 49% stake.
12

14. In conclusion
01
02
03
13
Accelerate implementation of broadband rollout
and free up spectrum, in order to
enable growth within ICT industry and outside of ICT industry
whilst including Government’s own digitisation plan as an integral part of the rollout
Develop forecast of future skills requirements
and increase STEM graduates to underpin growth in services industries
as well as to attract FDI to increase local manufacturing and design
Develop regionally aligned policies
that comprehensively addresses harmonised technology standards, strategic
procurement and local manufacturing,
as well as addresses the intersect between industries brought about by IoT -
XaaS, whilst maintaining a focus on security

15. Thank you
Sharoda Rapeti
Director
Direct: +2711 806 5973
Mobile: +2783 212 2251
Email: srapeti@deloitte.co.za

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