Not much hope of funding boost for ICT on budget day
Even though ICT solidified its status as the “star of the show” amid the COVID-19 pandemic, it’s likely to be brushed over once more on budget day.
Finance minister Tito Mboweni will deliver the budget speech before a hybrid sitting in the National Assembly this afternoon, and will need to present a concrete plan to bolster SA’s sluggish economy.
SA’s economic prospects were already fragile before the pandemic outbreak; however, the situation has since worsened, leaving many without jobs, consumers feeling the devastating effects and many businesses closing shop.
The International Monetary Fund has trimmed SA’s growth prospects, projecting economic growth will shrink from 3% to 2.8% in 2021, with growth of only 1.4% next year.
While ICT is among the industries believed to have the ability to fire up the economy, industry pundits are not placing bets on there being a push to fast-track funding for ICT infrastructure.
Derrick Chikanga, IT services analyst at Africa Analysis, points out that besides government’s SA Connect project and its smart city initiative, he doesn’t see much being done.
“Given the pandemic and its impact on the economy, I do not think government will have much funding to finance major ICT projects. Hence, government will probably rely on telecoms operators to provide affordable connectivity after the auctioning of high-demand spectrum.”
For Mark Walker, IDC associate VP for Sub-Saharan Africa, government prioritising funding for ICT remains a fervent hope rather than a practical reality, when given the parlous state of the fiscus and limited focus on ICT infrastructure rollout in the State of the Nation Address (SONA).
“In SONA, mention was made of R340 billion available for infrastructure development; however, this is to be shared among energy provision, water management and distribution, transport and telecommunications. Given the pressing need for these civil projects, it is likely telecoms and IT will not receive a lion’s share.”
ICT rallied much of the South African workforce and schooling in 2020, and continues to do so this year, as SA tries to flatten the curve of the COVID-19 second wave.
Professor Martin Butler, head of teaching and learning and associate professor for digital enterprise management at the University of Stellenbosch Business School (USB), believes there should be a significant ICT infrastructure push, but he doesn’t foresee this happening.
“Firstly, the COVID-19 pandemic is not over, and access to ICT infrastructure for education and multiple economic activities will still be required in 2021. Citizens and enterprises that struggled during 2020 will continue to struggle. Those who had the means to become part of online communities and adapted to the online world, now have the means and knowledge to grow and accelerate their online abilities in 2021 and beyond.
“2020 has seen significant growth in digital adoption across industries; however, sadly, also significant increases in the digital divide. It is challenging to improve any process or capability by enhancing the most proficient part of it, since you will be expanding the inequality within the process or capabilities. The golden rule of improvement is to reduce variance, yet ICT capability variance grew in 2020. So yes, government should push, in principle, to assist those with the most significant need and lowest access levels to ICT services.”
Sharing tips for the finance minister, Walker notes the benefits of strong ICT infrastructure will help SA recover from the COVID crisis and position it in its rightful place in the global economy.
“Not focusing on investment and prioritisation of ICT as a key catalyst for growth and future economic success will further hamper progress for a long time.
“Reduce the tax burden on ICT companies in the form of rebates and tax-holidays on equipment and services rendered to accelerate ICT rollout.
“Allocate specific earmarked student funding for ICT qualifications and trades based on academic merit.
“Allocate ICT-specific funding to the NPA [National Prosecuting Authority] and SIU [Special Investigating Unit], to enable effective use of ICT to track down and bring to justice corrupt elements in the South African economy,” advises Walker.
Chikanga points out that while COVID has negatively affected other key sectors of the economy, such as hospitality and tourism, priority should also be afforded to the ICT sector through a meaningful budget allocation.
“For a start, the ICT sector enabled business continuity during the initial phase of the hard lockdown. Services such as cloud and data centre services enabled most businesses to adopt a work from home approach.
“However, not all communities benefited from such ICT services. Importantly, schools in rural communities remained largely unconnected, resulting in most learners being unable to engage in e-learning activities, except for accessing zero-rated Web sites.
“Urban learners had ready access to devices such as smartphones, tablets and laptops, which enabled them to easily transition to e-learning. This further increased the digital divide between urban and rural learners.”
Government must speed-up the provision of Internet connectivity to rural and marginalised communities, and invest in devices to enable e-learning activities for these areas, notes Chikanga.
USB’s Butler advises the minister to look to the domino effect, the sustainable nature of ICT investments and the results of appropriate ICT investments.
“We have to resist investing in the short-term gains and look for sustainable infrastructure initiatives to enable medium- and long-term growth. Identify the significant opportunities that require multi-year investments and will create real social and economic impact.
“It is essential for the minister to be clear on accountability for failed progress on two of the last couple of years' larger ICT investments. The SA Connect project, funded with billions of taxpayer money, promised connectivity for 90% of South Africans by 2020, and 100% by 2030.
“The digital terrestrial migration project, not funded to the same extent but stalled by regulatory ineptitude, was planned for completion in 2006. Fifteen years later, we are still dragging our feet and creating cumbersome allocation processes for spectrum that should have been completed 10 years ago.”
More funds for DCDT?
On whether the Department of Communications and Digital Technologies (DCDT), the ministry charged with driving SA’s ICT agenda, should be allocated a bigger budget for improved ICT infrastructure development, the views are mixed.
Chikanga and Walker “absolutely” believe the DCDT could do with a boosted budget. However, Butler is of the opposite opinion.
Butler believes it’s time for the department to be held accountable for the money received that didn’t equate to tangible results. “Rather than taking pride in an unqualified audit, aim for a clean audit to show you have the necessary fiscal controls. Rather than aiming for a bigger budget, monitor and control efficiencies on the projects and entities under your control where wastage occurs.
“The central budget probably has no room for additional allocations to ICT. Clean your house, hold people accountable from the top, get your overdue projects done, and show the results from the billions sunk into organisations like SITA and ICASA, and projects under-delivering like SA Connect and the digital terrestrial migration before asking for more money.”