BMI View: Egypt's IT market is forecast to increase to US$1.7bn in 2012, up by around 8%, with our projection remaining unchanged from Q112. Consumer and business IT spending are projected to report similar growth in 2012, despite continued uncertainty following the political events of 2011. Over BMI's five-year forecast period, Egypt will benefit from youthful demographics and improving information and communication technology (ICT) infrastructure. However, there are a number of market constraints, including a sub-optimal distribution network outside Cairo.
Headline Expenditure Projections
Computer hardware sales: US$956mnn in 2011 to US$1.0bn in 2012, +9% in US dollar terms. Forecast in US dollar terms unchanged and computer penetration is forecast to rise from 10% now to above 20% by 2016
Software sales: US$217mn in 2011 to US$234mn in 2012, +8% in US dollar terms. Forecast in US dollar terms unchanged but SMEs are beginning to see software investments as more important
IT Services sales: US$376mn in 2011 to US$412mn in 2012, +10% in US dollar terms. Forecast in US dollar terms unchanged with demand from government, finance and telecoms sectors accounting for more than half of total spending.
Risk/Reward Ratings: Egypt's score was 38.2 out of 100.0 and the country ranked second from bottom in our latest MEA region RRR table, behind the likes of Saudi Arabia, Kuwait and South Africa, and ahead only of Jordan. Despite the high growth potential of the market, which was reflected in an IT market score of 40, Egypt's overall ranking was constrained by a lowest-in-region Country Structure score of just 25.
.. Although BMI remains sanguine about the short-term market outlook, uncertainty about the future direction of economic policy will constrain business investment. Any signs of a return of instability could have an impact on the long-term development of Egypt's IT services sector. Following the events of February 2011, some retail outlets and distributors suspended operations, causing disruption to supply chains, which are already patchy outside of major cities.
.. Egypt's IT market will stay hardware dominated, with spending on PCs sustained by initiatives such as the 'Computer For Every Student' and 'PC for Every Home' programmes. Hardware accounted for an estimated 62% of Egypt's IT spending in 2011. Households are responsible for 20-25% of unit sales, with 1.0-1.5mn households said to possess a computer at present.
.. The Egypt government has stressed its commitment to modernisation and to continued investment in Egypt's IT sector, with a number of initiatives announced to support local sector companies. Access to credit remains a barrier for smaller Egyptian companies, but initiatives such as that launched by the Bank of Alexandria will help smaller Egyptian companies invest in IT.
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Egypt Information Technology Report Q2 2012
