Adapt IT’s plan to grow in the slow South African economy

Adapt IT has released its interim results for the six months ended 31 December 2018, showing an increase in profitability and the positive effects of its acquisitions.

Following their release, MyBroadband spoke to Adapt IT CEO Sbu Shabalala about the company’s results and its strategy for the rest of its financial year.

Shabalala said there was strong potential for growth in South Africa and that it remained Adapt IT’s primary market.

However, slowing consumer spending and a lack on infrastructure development mean the company has looked overseas for extended growth opportunities.

The company has seen good growth in overseas markets and last year it acquired Australian education software company WiseNet to boost its international presence.

Wisenet serves approximately 11% of the Australian market and has a footprint in three Asian countries.

Weathering the storm

Shabalala said that he was pleased with the business’s profitability in the slow South African economy.

“The results are an indication of the market that we are faced with, and it has been particularly tough in the South African environment,” Shabalala said.

“South Africa constitutes about 78% of our revenue, so we expected that the South African market would be tough due to customers not buying software. That’s why we began focusing outside of South Africa.”

He added that the business has also focused on profitability, which increased by 10% over this period.

“If the market doesn’t grow in the next six months, we have already made some acquisitions that will help contribute in different markets outside of South Africa,” he added.

A number of Adapt IT’s primary sectors continued to see double-digit growth however, with manufacturing, financial services, and telecommunications performing well.

“These sectors did give us the growth that we needed, but South Africa in turn is waiting for infrastructure spending,” Shabalala said.

“Once that comes in, then we will start seeing customers in our manufacturing sector picking up and we will also start seeing other sectors begin improving.”

Government spending and global reach

The potential for Adapt IT’s growth in the local market lies with the government and consumer spending, said Shabalala.

“Everyone is three customers away from the government and the government is the largest spender in South Africa – and we have seen a slowdown in government spend,” he said.

“Therefore that affects our customers and in turn affects us.”

“We are hopeful that with the elections coming up and government spending coming through in the right places, we will start seeing our customers spending again.”

He reiterated that Adapt IT is looking outside of South Africa for growth while it waits for this resurgence to occur.

Adapt IT is also relatively insulated from economic fluctuations by its annuity revenue, and the company aims to expand its reach across the world.

“We seek to bolster the sectors we are invested in, but we are also cognizant of the fact that we have to look for worldwide reach.”

He said the African market has a lot of potential for growth, including Botswana and East Africa.

“We see the African and Pan-African market as our primary markets. If our business is the software vendor for those markets, we believe there is a lot of opportunity for growth.”

“We will look at other markets, but we believe that we can still grow the business in the primary markets that we are in.”

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Adapt IT’s plan to grow in the slow South African economy