While Challenging, Government Projects Still Set to Account for Significant Growth in the South African Smart Card Market

Frost: The South African smart card market is poised to experience a significant growth spurt over the next six years with the introduction of smart cards by the banking and government sectors. Although both processes have been somewhat delayed, they are currently proceeding according to schedule and 2006 is likely to see some noteworthy movement in this regard.

The Europay- MasterCard-Visa (EMV) migration is entering its final phase and should be completed this year, with banks having announced their intention to roll out smart cards to clients in the third quarter of 2006.

It is expected that a wide distribution of smart cards amongst banking clients will result in higher smart card adoption. It will also result in the introduction of new value-added services utilising smart cards.

Such positive trends in the banking sector will be reinforced by government initiatives. The South African Government has undertaken a new national identification programme of which smart cards form one facet. A tender for the manufacture of these cards is expected in 2006 with their roll out set for 2007.

However, the most pressing challenge facing market participants in the government sector is the issue of timing. Although the South African Government is currently undertaking the national identification process, the programme has been fraught with many delays. Companies wanting to tender bids to manufacture cards for this project have had to contend with constant delays that, in some instances, have extracted a heavy financial toll on them.

Market participants wanting to take part in government-driven projects have to ensure that their strategy is suited for this particular type of industry. Companies will have to account for delays, requirements that are specific to the sector and they will be expected to address issues such as Black Economic Empowerment.

Strategic Analysis of the South African Smart Card Markets

Publ 20060601