Value Chains in the Global South: Case Studies of the Cape Town ICT Sector
ICT services are a critical input into development since unlike any other service, they are able to shift the production possibility frontier outward over time and enable better utilisation of scarce resources. In South Africa, the ICT sector has grown in tandem with the rapid expansion of the sector globally and the level of sophistication of both the software and hardware components of the industry is on a par with the developed world.
This paper explores the nature and dimensions of the South African ICT sector and within it, the Cape Town sub-sector. Of the sub-sectors within the ICT sector, business and software services are the highest value-add activities and these activities are the ones around which the Cape Town sector is largely based. The empirical section of the paper presents feedback from a sample of four firms located in this industry space, with a view to understanding the extent of their integration with value chains, their experiences with value chain governance and upgrading and the challenges they face in expanding their operations.
Since many of the Cape Town ICT sector’s firms are already relatively advanced, there is probably far less scope for value chain upgrading than in other local sectors such as agriculture or mining. However, the sector has the potential to play a leading role in Africa and the broader global South through collaboration and technology transfer. In order for its potential to be realised however, the funding model available to dynamic and cutting edge micro and small enterprises has to be revised to make it more relevant and helpful to the local industry.
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