A new report commissioned by Amazon Web Services has revealed a potential R3.9-trillion economic boost by 2033 from cloud adoption in South Africa.
The report, which quantifies the relationship between public cloud computing adoption, national productivity and economic growth in South Africa over the next ten years, shows the potential for the multitrillion-rand additional economic value, representing 4.05% of South Africa’s cumulative gross domestic product (GDP), by accelerating adoption of cloud.
The study was undertaken by Telecom Advisory Services and directed by Columbia Institute for Tele-information (Columbia Business School) business strategy research director Raul Katz.
Katz explains that previous research and studies on the economic impact of cloud were focused on the firm level, understanding the microeconomic benefits associated with cloud adoption, and, while valuable, did not quantify the aggregate effect of cloud on the economy in a similar way to what has been done in areas such as broadband Internet.
“To address this gap, our team at Telecom Advisory Services developed a state-of-the-art econometric model, leveraging global series of data on cloud adoption between 2014 and 2021,” he says.
“This report underscores the immense potential for South Africa, and the sub- Saharan Africa (SSA) region, to harness cloud computing and expedite economic growth. By increasing the current average cloud penetration, the region can unlock additional economic value,” adds AWS SSA GM Amrote Abdella.
The report shows that cloud adoption made a significant impact on the South African economy in 2021, contributing 0.18% to the regional GDP and generating an economic value of R14.3-billion.
More than 78% of this impact can be attributed to the national productivity gains or so-called spillover effects on the economy, while the remaining 22% is driven by cloud spending from both public and private organisations.
“It was found that South Africa has the highest economic growth, owing to cloud adoption in SSA, with a 1% increase in cloud penetration yielding a 0.06% increase in GDP growth, three times more than the SSA average,” says Katz.
“Extrapolating this data, a 10% increase in cloud penetration across the entire SSA region would result in economic spillover effects amounting to an estimated R71.9-billion a year,” he added.
“The study demonstrates that the economic impact of cloud computing is guided by returns to scale – greater adoption of cloud computing will lead to proportionally greater productivity gains and economic impact.”
There is an opportunity for South Africa to enhance its cloud penetration and reap substantial benefits, as, according to the report, only 34% of organisations in South Africa embraced cloud computing in 2021, significantly lower than the adoption rates of 49% in Western Europe and North America.