Is broadband SA's economy saviour?

Johannesburg, 11 Jul 2014

Broadband won't be the economy's saviour, but it is a vital element if SA is to stay afloat globally.

Government has acknowledged the weight broadband holds in turning the country's ailing economy around, saying the ICT sector is at the heart of its developmental agenda - but for tangible improvements, SA needs radical action.

Telecommunications and postal services minister Siyabonga Cwele said yesterday that, for SA - and Africa at large - to achieve universal access and services, government needs to be "radical in our approach".

And it is broadband, says Cwele, that is the most important part of the Department of Telecoms and Postal Services' (DTPS's) focus. "My ministry's focus is to expand, modernise and increase the affordability of ICT infrastructure and electronic communications services and this is mainly through broadband."

He notes SA's telecoms sector is growing at a rapid rate. In 2011, the sector's estimated worth was R179 billion - a number that is expected to reach R187 billion by 2016.

But SA is going through what analysts tag as one of the toughest economic times in recent history, with its mining and metal industries taking strain in the wake of extensive strike action. Industry observers say, while broadband alone will not do the trick, it is one of the top economic enablers at our disposal.

Regime role

ICT veteran Adrian Schofield says as with most interventions, there is no simple answer. While affordable and accessible broadband is an essential ingredient to a stable economy, he says, SA needs better education, better healthcare services and an empowered people. "Technology is the enabler, but there must be effective policy implementations across the economic spectrum to take advantage of that enabling mechanism."

Schofield says to date, SA has seen "too many initiatives and not enough follow through" from government when it comes to expanding broadband penetration. "Government must take the money that is available in its various coffers and put it in the hands of the network builders and operators, on condition that the reach, speed and affordability objectives are met.

"There should be better coordination between the bits of government that have their fingers in the pie (ministries, departments, agencies and state-owned entities) and proper allocation of spectrum among the service providers."

The allocation of spectrum - long the bane of SA's ICT sector - is "where it all starts", says World Wide Worx MD Arthur Goldstuck. "There isn't yet anything on [government's] table that specifically addresses broadband rollout. That will probably emerge in the coming year as we aim for universal broadband. It is a long-term initiative, but the sooner the better and where it must start, is with the allocation of spectrum."

Dennis Naidoo, general manager of public sector at Internet Solutions, says government alone does not have the resources to tackle the mammoth task of giving South Africans a better life. "The next generation of genuine public-private partnerships will be the way to access private sector capital and know-how."

Private position

The private sector - notably SA's telecoms giants - may not always be the most popular group on the block, but its investment has made a palpable difference in the lives of many South Africans, say experts. Benefits range from socio-political inclusion and social cohesion - to the emergence of businesses that would not exist without Internet access.

World Bank study

The often-cited World Bank study that, for every 10% increase in broadband penetration there is a 1.38% GDP growth off-spin needs to be reconsidered, say analysts. The study was conducted in 120 countries between 1980 and 2006.
Goldstuck says the study has become a standard mantra and needs to be revisited. "You can't switch on broadband and the economy grows - there have to be other enabling factors."
Schofield says the statistic suggests that going from 0% to 100% broadband penetration would result in a 13.8% GDP growth rate. "It's never going to happen. It must be part of a package, where the economy benefits from a range of interventions that improve the 'climate' to make the country more investment-friendly, more attractive to entrepreneurs and more desirable as a place to visit and to live."

"Where there is revenue, connections are being made," says Schofield. While there are questions about the capacity meeting demand and too many customers are tolerant of poor performance, the private sector is overall doing a fair job, he says. "Bear in mind the capital investment required on a continuing basis. There needs to be a balance between the mono/duopolistic economies of scale and fair, effective competition."

Goldstuck says SA cannot point fingers at the likes of Vodacom and MTN - although the commitment of telecoms companies to lowering costs leaves a bit to be desired. "If you look at our communications giants, they are investing billions in infrastructure. What is lacking is a commitment to making broadband accessible and affordable to all."

Cwele said yesterday: "We agree with the International Telecommunication Union's focus on the importance of broadband to accelerating our country and the region's economic and development prospects". And while government's vision of broadband for all by 2020 may not be a realistic hope to hold at this stage "it is certainly worth striving for", says Goldstuck.