Professor Francesco Petruccione’s decision to leave his native Italy to accept a quantum research position at the University of Kwazulu in Durban, South Africa, may not seem to be an obvious career move, but Mr Petruccione was fully aware of the benefits South Africa has to offer.

One of those perceived benefits is access to funding. In Durban, Mr Petruccione oversees the Centre for Quantum Technology (CQT), which was established in 2005 with a R10m ($992,600) research grant from the National Research Foundation’s Innovation Fund.

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Mr Petruccione will soon be launching Quantum Machine, a company involved in quantum security, cryptography, and information and communication technology (ICT). “In Europe, too many top-level people are chasing a finite amount of money,” he says. “Here, there’s less competition.”

Some executives argue that venture capital in South Africa is sorely lacking, with most funding sources limited to an disorganised collection of angel investors. Nevertheless, Quantum Machine is poised to become the world’s fourth quantum technology firm.

Secure market

As Mr Petruccione sees it, the secure encryption market offers huge worldwide potential with relevant applications for government, armed forces, research institutes, large finance institutions, foreign embassies, health organisations, off-site data centres and intellectual property – and Durban is the perfect springboard for its success.

Last summer, miles of fibre optics were rolled out in Durban, starting a broadband network that enables the city to provide users with affordable connectivity and low-cost local phone calls as the city aspires to become one of the world’s first and leading e-cities. The eThekwini Municipality initiative to make Durban the ‘SmartCity’ of South Africa and the African continent is the result of CQT-developed technology. The plan is to install its quantum communication security solution over the eThekwini Municipality fibre-optic network infrastructure, making it possible for Durban’s vital services and municipal offices to transmit information securely between buildings across the city. Only London is considering a similar secure network.

“Durban’s programme is stimulating academic and industry research,” says Robynne Erwin, CEO of Smart Xchange. That stimulation is being felt at Smart Xchange, an organisation founded by the eThekwini Municipality and the Durban University of Technology. It is charged with helping to develop small, medium and micro-enterprises, especially black economic empowerment business concerns, to retain ICT skills in Durban. Smart Xchange also helps raise venture capital and offers incubator space.

One of its tenants, Ramco Systems Limited, has partnered with IT solution provider CityWorks (Pty) of South Africa to develop revenue management Logosoft software for the municipality. Ramco, based in Chennai, India, is a software solutions provider with customers in 35 countries. “Ramco will gradually exit the business but keep writing state-of-the-art technology,” says Sandeep Mishra, general manager of Ramco Systems. “CityWorks will take over our operations centre here.”

Across the country

South Africa’s ICT sector is not limited to Durban. Companies are locating across the country from Cape Town to Johannesburg.

Dimension Data, a $4bn IT services specialist and solution provider in Bryanston, just outside Johannesburg, helps clients to simplify and consolidate their IT infrastructures through internet protocol convergence. It has operations in 46 countries across six continents.

DigiCore Holdings in Irene, also outside of Johannesburg, develops and implements end-to-end vehicle tracking and fleet management solutions. Fundamo, in Durbanville near Cape Town, provides mobile applications and business solutions to organisations wishing to do banking, payments and other transactions from mobile devices.

“We feel mobile banking in South Africa is on its way to taking off,” says Fundamo marketing manager Debra Ogilvie. “Rather than going into Europe or the US, we find mobile banking is a good alternative in poorer nations where people do not have access to branch banks and the internet.” Fundamo has already exceeded its expectations in the Democratic Republic of Congo, has started business in Zimbabwe and is active in South Africa.

Although the ICT sector in South Africa is expanding, it faces challenges due to the country’s high cost of telecommunications -- the result of a lack of competition and too much dependence on part state-owned company Telkom. Then there is the shortage of skilled ICT workers needed to keep up with demand, the digital divide and issues of universal access, limited bandwidth, lengthy sales cycles and high inflation, says Lindsey McDonald, industry analyst at Frost & Sullivan in Cape Town. She says only 19% of South Africans have telephones in their homes, 658,000 subscribe to the internet and 3.8 million, out of the country’s 170 million population, use the internet at all.

Nevertheless, she says, telecommunications is the country’s most prominent vertical industry: “The industry’s growth will exceed that of other large verticals, despite poor economic conditions.” The ICT sector is growing at a rate of 15% to 20% annually and South Africa’s mobile phone market is expanding at 50% annually, the fourth fastest rate in the world. “But while some ICT companies are exceeding expectations, others are not,” she adds.

While South Africa may be the wealthiest country on the continent, unemployment levels are at about 40%, and many unemployed people are unskilled. Yet the country ranks 18th among the world’s most attractive locations for FDI, according to the World Bank, and is the world’s 26th most industrialised nation. South Africa is also regarded as the gateway for companies wanting to do business in Africa.

Boosting enthusiasm is world football’s governing body FIFA, which chose South Africa for the 2010 World Cup. New stadiums are under construction throughout the country, and there is a $60bn commitment to new infrastructure over the next three years. That will include a new airport in Durban and an expanded telecom networks to accommodate fans.

Johannesburg will be the home of the International Broadcast Centre (IBC), the nerve centre for all television operations and the world’s news agencies during the tournament. It was selected over Durban and Cape Town because of its superior accommodations and transport infrastructure.

Competition unfolding

Competition is starting to unfold among South Africa’s big telecom players: Neotel, MNT and Vodacom. In fact, in November 2008, Vodafone Group PLC, the world’s biggest mobile phone provider by sales, announced plans to take majority control of South Africa’s largest mobile phone company, Vodacom.

As in Durban, cellular operators in South Africa are installing fibre-optic networks to meet growing requirements for voice and data services. MTN is laying 5000 kilometres of fibre-optic network nationally at a cost of R7bn, to be completed this year. Neotel is also putting in an undersea cable this year to increase international bandwidth at a significantly reduced price as part of the operator’s R11bn capital expenditure plan. Meanwhile, the EASSy Project, a consortium of telecom operators, is laying an undersea fibre-optic cable to link eastern and southern Africa.

“Given the current deficiencies in [South African] telecommunications, there is a clear need for action,” says Dr Sharon Horton Herselman, spokesperson for Universal Service and Access Agency of South Africa. “There are also massive untapped opportunities, with huge townships totally underserved.”

COUNTRY PROFILE

SOUTH AFRICA

Population: 48.78 million

Pop. growth rate:

0.83%

Area:

1.22 million sq km

Real GDP growth: 5.1%GDP per capita: $9700

Current account:

-$20.63bn

Largest sector (% of GDP): Services 65.5%

Labour force: 20.49 million

Unemployment rate:

24.3%

Source: CIA World Factbook, 2009