Amazon Web Services(AWS) has commissioned a comprehensive report shedding light on the profound impact of public cloud computing adoption on South Africa’s national productivity and economic growth. The study, conducted by Telecom Advisory Services LLC and overseen by Raul Katz, Director of Business Strategy Research at the Columbia Institute for Tele-information (Columbia Business School), employs advanced econometric methods to quantify the aggregate productivity gains realised by economies embracing cloud computing. Unlike previous research that primarily focused on firm-level productivity, this report establishes cloud adoption as a catalyst for national productivity and economic expansion.
In 2021, cloud adoption in South Africa left a significant imprint on the nation’s economy. According to the report, it contributed 0.18% to the regional GDP, translating into an economic value of R14.3 billion. Remarkably, over 78% of this impact can be attributed to national productivity gains, often referred to as “spill-over effects.” The remaining 22% stems from cloud spending by both public and private entities.
The data reveals a compelling correlation: for every 1% increase in cloud penetration, South Africa’s GDP witnessed a corresponding 0.06% rise. Notably, South Africa outpaces its sub-Saharan African (SSA) counterparts, with its adoption of this technology driving a threefold higher GDP growth for every 1% increase in penetration, compared to the SSA average.
Extrapolating this insight, a 10% increase in cloud penetration across the entire SSA region could yield annual economic spill-over effects amounting to approximately R71.9 billion.
Dr. Katz elucidates the significance of this research, stating, “Until recently, research on the economic impact of cloud was confined to the firm level, assessing microeconomic benefits like capital efficiency and contributions to product development. These valuable studies, however, did not comprehensively quantify cloud’s aggregate effect on the economy, akin to what has been done with broadband Internet. To bridge this gap, our team at Telecom Advisory Services developed a state-of-the-art econometric model, leveraging global data on cloud adoption spanning from 2014 to 2021.”
Amrote Abdella, General Manager for Sub-Saharan Africa at AWS, underscores the potential for South Africa and the SSA region to harness cloud computing for accelerated economic growth. She emphasises the importance of increasing average cloud penetration in the region to unlock additional economic value. AWS, as a committed partner, believes that the technology will be pivotal in driving innovation, enhancing productivity, and scaling businesses throughout the region in the coming decade.
The report underscores the principle of returns to scale in the economic impact of cloud computing—greater adoption of cloud technology leads to proportionally larger productivity gains and economic benefits.
In 2021, only 34% of South African organisations had embraced cloud computing, notably lower than adoption rates in Western Europe and North America, standing at 49%. This disparity presents a compelling opportunity for South Africa to bolster its cloud penetration and reap substantial advantages.
“As the current projections reveal, the economic impact of cloud computing is undeniable and poised to be a driving force for economic prosperity. Therefore, it is imperative for businesses in the region to invest in cloud computing technology to remain competitive and unlock their economic potential,” adds Abdella.