Govt wants STB manufacturing sector

By Nicola Mawson, Contributing journalist

Johannesburg, 24 Jul 2009

The Department of Communications (DOC) has resurrected the idea of developing a local sector that will manufacture the set-top boxes (STBs) required to view the new digital signal when analogue broadcast is turned off in 2011.

The “Set-Top Box Manufacturing Development Strategy for SA”, released this week, aims to develop local manufacturing capabilities, as well as build an industry that can export the boxes and strengthen SA's engineering skills base.

The DOC aims to publish the strategy by September, and has asked for comments on the draft strategy to be given by 7 August.

The country is in a three-year dual-illumination period as it gears up for the old analogue signal to be turned off in 2011, when digital broadcast takes over. The international cut-off is 2015.

Not new

The concept of a manufacturing sector strategy is not new. Last year, government scrapped the tender for the development of an STB manufacturing strategy, deciding instead to develop a blueprint for a new industry internally.

At the time, then communications director-general Lyndall Shope-Mafole said the proposed strategy would build a completely new STB manufacturing industry, encouraging the entry of new players, while also including existing ones.

The plan was to encourage previously disadvantaged groups, including women, to enter the arena, as the country is loathe to rely on international suppliers, explained Shope-Mafole, at the time.

The strategy would include an analysis of the domestic electronic manufacturing sector and will recommend an optimal rollout plan for STBs. This would include an analysis of possible incentive and support schemes and viable distribution networks in primary and secondary cities, she explained.

Subsidised boxes

There are six companies in SA that already manufacture set-top boxes, and three of these have engineering capability, the new draft document says. It expects more companies to enter the sector, which opens up opportunities for empowerment and small enterprise development.

About R2.45 billion has been budgeted to subsidise boxes for about five million households that cannot afford them. Of this, R400 million is to be spent this year.

However, the draft says government will only source these boxes from companies that have developed them locally. Sourcing of subsidised boxes will be limited to four SA companies, the DOC says.

In addition, the intellectual property used to develop the boxes must be shared with other manufactures that do not have the capacity to design their own boxes. The draft also says that the Independent Communications Authority of SA will test and approve the boxes before companies are allocated manufacturing volumes.

However, in order to implement the strategy, local companies would have to invest, it says. The DOC anticipates that manufactures will invest between R2.5 million and R30 million to meet demand. New companies would spend between R30 million and R60 million to build new factories.

But, companies would have to have black economic empowerment credentials to manufacture the subsidised boxes, the draft says. It doesn't give specific percentages.

Growth opportunities

Last year, 36 million set-top boxes were shipped around the world, a figure that is expected to increase to 44 million this year, the department says. The local market is estimated at eight million units, but the DOC anticipates that this sector will grow.

It says this is why government wants a local sector to manufacture the boxes. “There are also expectations that, by creating this capacity, it would offer opportunities for local companies to export to the rest of the African continent,” the draft document says.