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Big IT dreams but even bigger hurdles for South Africa`s neighbours Zimbabwe`s ICT industry is barely managing to hold its own in a battle against hyper-inflation, instability and a `skills diaspora` that is robbing the country of promising young professionals. Those still operating in the Zim ICT sector say there is vast potential for growth - if the economy stabilises. DESPITE socio-political upheavals and a notoriously unstable economy, neighbouring Zimbabwe`s ICT sector has managed to limp along - for now. But the future for the sector looks dim as growth is hampered by a range of problems - most of them due to the state of the country`s economy, say the industry`s players.

Runaway inflation means the average Zimbabwean does not have the disposable income to indulge in basic services like telecommunications, let alone home PCs and mobile gadgets.

ICT entrepreneurs report that they have immense trouble securing financial support to get businesses up and running - banks apparently have little interest in investing in IT and foreign investors won`t go anywhere near Zimbabwe at the moment.

The COO of Harare-based Soft-IT Consultants International, James "JJ" Jamu, says: "Hyper-inflation and the unstable economic environment in the country are among our biggest challenges.

"Companies are now revising their budgets and some are even shelving IT projects altogether. It is now difficult to hold a quotation for over a week. Some companies are opting to quote in local currency, but pegged at the ruling foreign currency mid rate."

HELLO? IS THERE ANYBODY OUT THERE?

In contrast with the rest of Africa, where mobile penetration is spreading like wildfire, Zimbabwe has relatively low mobile subscriber numbers. This is mostly due to the exorbitant cost of SIM cards, say many.

In a population of just over 12 million, there were roughly 697 000 mobile subscribers and around 362 000 fixed lines at the end of 2005, says BMI-TechKnowledge.

According to the CIA World Fact Book, Zimbabwe`s telephone system was once the best in Africa, but now suffers from "poor maintenance". According to a report in 2004, the country had over 100 000 outstanding requests for connection despite an equally large number of installed, but unused, main lines.

SIM starter packs are so scarce they are now only available on the black market, says Brian Burayayi Mukudzavhu, CTO of IT and network management company Axis Solutions, vice chairperson for the Harare chapter of the Computer Society of Zimbabwe and former head of the local chapter of the now-defunct Information Systems Security Association.

"SIM starter-pack prices can cost up to US$147 (converted at the official rate). Foreign currency shortages and tariff controls mean that the operators cannot expand their capacity. Zimbabwe might be the only or one of the few countries where a starter pack costs more than the handset," he says.

Sure Kamhunga, spokesman for Zimbabwe`s biggest mobile services provider, Econet Wireless, explains: "Demand for mobile cellular services in Zimbabwe currently outstrips supply, mainly due to the slow pace of expansion by existing operators as a result of their inability to access hard currency needed to import network equipment. The shortage of hard currency is largely a result of the current macroeconomic challenges facing the country."

He notes that the 6% mobile cellular penetration is "quite low by regional and international standards". "Therefore, there is potential for growth provided operators can access hard currency to import equipment to extend geographical coverage as well as introduce new products and services. Other challenges facing the mobile telecommunications sector is high inflation which has, and continues to, erode margins, in turn worsened by delays the sector experiences when it applies to the regulator to adjust tariffs.

"As a result, margins for both local and international calls continue to be eroded because of the hyper-inflationary environment and currency depreciation. However, the industry is currently negotiating with the regulator to adopt a tariff regime that is more responsive to movements in major cost drivers," says Kamhunga.

"It is true there is a serious shortage of cellular lines in Zimbabwe because of the high demand. This has regrettably resulted in a thriving grey market, particularly for prepaid lines, where a used line can be bought for as much as R1 375 (US$202) based on the current official Zimbabwe dollar/rand rate of Z$16 000 to R1). But if you use the black market currency rate of R1 to Z$45 000, that price comes down to R488 or US$72, still high by any standard."

Mukudzavhu adds that there should be a market for technologies like 3G in Zimbabwe, especially around Harare and Bulawayo. "Current links available in Zimbabwe are restricted to major cities like Harare and Bulawayo. Other centres still depend on leased lines and dial-ups, which are not dependable. This is an area that offers a lot of potential, whether fixed or dial-up."

STAGNATION SETS IN

, telecoms analyst for BMI-TechKnowledge Group/ South Africa, says that even though the Zimbabwean telecommunications market is seen as being liberalised, with two fixed-line network operators and three mobile network operators, the sector has been stagnating in recent years, due to various political and economic considerations.

Mukudzavhu notes that Zimbabwe currently has only one active fixed-line operator. "The second operator`s licence was cancelled this year because the network could not start operating in the time prescribed by POTRAZ. The operator, TeleAccess, has, however, gone to court but for now they are not licensed," he says.

"It seems that the major problem facing the mobile operators is access to foreign currency to fund networks` expansion activities to cater for additional subscribers," Hurst says.

"In tandem with this is the fact that the runaway inflation has implied that the average Zimbabwean does not have the disposable income that would usually be given to telecommunications, although the demand for basic services remains," says Hurst.

"Having said that, the market does hold a great potential for growth once democracy has been restored. My personal opinion is that the Telecel operation in Zimbabwe is a prime candidate for acquisition in the near future by regional operators such as or Celtel, which have been seeking continued African expansion opportunities."

SOFTWARE FOR AFRICA

Jamu says Zimbabwe`s software industry could be described either as still in its growth stage, or simply as "stunted".

"Most of the software being used is imported, while the number of local development companies is very small. We also have individuals trying their hand at development, thus making it difficult to quantify or assess the market. However, there has been a drive to try and assess the software development industry, and a Software Development Association has been formed," he says.

Jamu feels there has been a shift from imported software to locally produced and supported software due to the scarcity of foreign currency in the country.

"However, it is not automatic. The quality of the software has to be world class and this is where we also have an advantage. We use Rapid Application Development (RAD) and eXtreme Programming (XP) techniques to shorten the time to market. We are rightly placed for outsourcing opportunities from other countries as development costs work out much cheaper in Zimbabwe owing to our weak currency."

OFF A SINKING SHIP

Mukudzavu says the Zimbabwean ICT sector is on the decline "as the economy shrinks".

"Major ICT vendors like , DiData and EDS have either left the country or appointed franchisees/resellers, which bears testimony to the state of ICT. As a result of the foreign currency shortages, expenditure has gone down and piracy has been on the increase as people fail to pay for licences. There has been also a flight of skills to greener pastures."

Jamu concurs: "Experienced staff are now hard to get as most have left due to the diaspora. Should you find the experienced staff, then retaining them becomes a real feat. The Venezuela experience comes to mind." Quoting from John Hall in an article that appears in one issue of iWeek: "Venezuela had the same problem a few years ago; when IT students had to move to other countries to seek work once they finished their degrees, in order to earn a decent wage.

"To build skills and capacity in the industry, we have a couple of universities in our area and could, with time and patience, equip and develop a pool of computer science graduates who could be gainfully employed in the IT field," he says.

On a positive note, Jamu feels that Zimbabwe`s people could be one of its IT industry`s major `exports`: "I reckon we could also turn this into a plus if we were to impart skills to these graduates and export them to RSA, for instance. Zimbabweans are generally hardworking and have been known to deliver," he says.

HOPE FOR GROWTH

It is apparently difficult to determine the exact number of ICT companies in Zimbabwe, since there is no single regulatory body for the industry. However, Mukudzavhu says there are few major companies left and a multitude of smaller firms "that sell just about anything from cartridges to pirated software". He says: "Due to foreign currency shortages, locally-developed software should have a lot of potential, but [the sector] faces challenges [ranging] from skills shortages to a general lack of confidence by local users who prefer foreign packages, especially South African ones. The financial services sector is currently the largest consumer of ICT services."

He feels there is also potential for growth in hardware sales, IT security and POS and retail technology in Zimbabwe.

But a real lifeline for Zimbabwean ICT firms could prove to be expansion into the rest of Africa.

"As a survival measure ICT firms have ventured into Africa, especially Zambia, due to its proximity and the performance of the economy," says Mukudzavhu. "In terms of exports, Zim ICT firms can make it as long as they learn how to properly package their products and message, especially in the face of from South Africa."

Soft-IT is one of the companies with African expansion in mind. The firm develops customised database software and other generic software, as well as offering consulting services and training.

Jamu says: "We have a global vision and have set our sights on the African continent as a starting point. We have appointed agents in Kenya and Uganda. A partnership with a Swedish company is on the cards. We see the South African market as being very profitable and we are currently exploring several possibilities."

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