Top ICT tips for Mboweni's budget

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All eyes will be on finance minister Tito Mboweni as he delivers his budget speech on Wednesday.
All eyes will be on finance minister Tito Mboweni as he delivers his budget speech on Wednesday.

With the budget speech just two days away, the finance minister has received some advice from ICT sector players, including serial entrepreneur Michael Jordaan.

Tito Mboweni will address Parliament on Wednesday with his much-anticipated annual budget speech.

Load-shedding and Eskom are hot topics right now, and Mboweni is expected to provide meaningful answers and solutions to the troubles at the state-owned power utility.

However, with the incumbent administration giving much-needed attention to technology, innovation and digital skills, expectation is high for the finance minister to also shed light on key ICT projects.

On Monday morning, Jordaan tweeted: "My budget tip for @tito_mboweni is a digital tax for tech giants." Jordaan's tweet was in response to a Reuters article, revealing "New Zealand plans to update its laws so it can tax revenue earned by multinational digital firms such as Google, Facebook and Amazon".

During his State of the Nation Address (SONA), earlier this month, president Cyril Ramaphosa announced the country's education system will undergo a digital revamp and also confirmed the appointment of a presidential commission on the fourth industrial revolution.

The team at market intelligence and advisory firm IDC says national broadband rollout, digital terrestrial migration, digitalisation of education and the Industry 4.0 commission are some of the major ICT-related projects Mboweni should unpack during his speech.

"In order to garner further investor and voter confidence in the incumbent administration, he [Mboweni] would be wise to flag these as named programmes within the ICT budget allocation and to ensure they are sufficiently financed.

"However, there are two other major programmes that seem to have fallen by the wayside: the national broadband project and digital terrestrial migration. These projects are absolutely foundational... it's unlikely you'll have widespread use of iPads in school if learners have to rely on mobile data to get access to content, for example."

Broadband budget cuts

Last year, National Treasury announced the country's national broadband project, SA Connect, will receive a reduced budget of R1.7 billion over the medium-term.

In 2017, Treasury allocated R1.9 billion over the medium-term for broadband implementation, which was up from the R1.6 billion allocated the year before.

Government is looking to its ambitious broadband project SA Connect to provide broadband access to the critical mass of South Africans.

The project, however, has been plagued by numerous issues that have hampered its full implementation.

The IDC points out that the distribution of set-top boxes for digital migration has been a mess. "The minister would do well to signal his - and government's - understanding of the interconnectedness of all of these projects by increasing spending on the national broadband project, and to signal the intent by government to get migration going by showing the intended investment in the migration programme is short-term."

It adds: "The minister should now strengthen the promises in the SONA by the president with the specific focus on the national broadband in reaching the SA Connect targets to get 100% connectivity to government facilities by 2020. Also, the support and funding of the president's fourth industrial revolution committee; this might also have to provide clarification on where will this committee sit and how it will be funded.

"The minister should also focus on the investment to the Department of Basic Education in distribution of tablets and the investment to support the supply chain for distribution and maintenance of the devices.

"The funding on the development of the technology incubators by the Department of Small Business Development should be highlighted and emphasised."

Where is SA Connect?

IDC advises government to focus on the review of the SA Connect targets and progress.

SA Connect, first announced in 2013, is the national broadband project identified by government to meet the technology goals of the National Development Plan of creating an inclusive information society.

Due to the magnitude of the project, government decided it should be implemented in two stages: phase one and phase two. The first phase focuses on connecting all schools, health facilities, government offices, Thusong Centres and post offices in eight rural district municipalities to broadband services.

SA Connect aims to deliver 100% broadband connectivity to government facilities by 2020. It is also expected to deliver broadband access to 90% of the country's population by 2020 and 100% by 2030.

Mark Walker, IDC associate VP for Sub-Saharan Africa, adds: "The overall agenda in terms of ICT should be to provide citizens with better, faster, more connected services. However, before citizens are able to take advantage of, say, online applications for grants, they need to be connected. Therefore, budget allocation around ICT should go towards increasing Internet penetration and reducing data costs.

"I believe that each of these [ICT] projects are critical to SA's future success and so the question is rather can we afford not to pour money into them. However, in the context of tightened budgets, even flat investment in these areas would be positive. The broad scope of these projects leaves them very ripe for graft, so the key lies not only in ensuring they're sufficiently funded, but that the eventual spending is not lost to corruption or wasteful spending."

Eskom headache

As Eskom rolled out blackouts last week, mobile operators highlighted the impact this has on networks and operational costs.

Professional services firm PwC says although it was announced that Eskom will be restructured into three entities as part of a turnaround plan for the power utility, this will bring no immediate relief to Eskom's dire financial situation.

PwC expects the finance minister to comment on the president's pledge that government will continue to support the state entity's balance sheet.

"Government's exposure to SOE (state-owned enterprises) debt has risen from R160 billion in 2011 to R308 billion in 2017. In 2017, Eskom accounted for 73% of total government exposure to SOE debt.

"Eskom tariffs have roughly doubled over the past seven years; despite this, Eskom still exposes the state to high levels of debt. Furthermore, the power utility is seeking additional tariff increases of over 15% per year as a way to maintain it as a going concern.

"Minister Mboweni will need to indicate the path forward for SA's SOEs. Tangible effort will need to be given to a strategy that gives a clear perspective to how government can drive SOEs' developmental mandate while ensuring they remain financially sound. The fate of employees at these public entities is a sensitive issue that must be considered."

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