How a connectivity levy became a tax on telecoms

The legal and institutional framework underpinning South Africa’s universal service obligations in telecommunications is no longer fit for purpose, industry leaders have warned.

The levy paid by licence holders increasingly resembles a general tax rather than a ring-fenced contribution to closing the country’s connectivity gaps, they said.

Telecoms licensees pay 0.2% of their licensed revenue into the Universal Service and Access Fund, administered by the Universal Service and Access Agency of South Africa (Usaasa).

But according to Internet Service Providers’ Association (Ispa) regulatory advisor Dominic Cull, the cash does not flow directly to the fund. It is collected by Icasa, transferred to national treasury and a only portion of it is allocated through the budget process – breaking the link between what licensees contribute and what is available for universal service projects.

“That is something which needs to be looked at because it becomes more of a general tax and not a specific contribution for a specific purpose,” Cull said in an interview with TechCentral on Thursday.

Usaasa has a long history:

• It was originally founded as the Universal Service Agency under section 58 of the Telecommunications Act of 1996.
• It was reconstituted in its current form under sections 80 to 91 of the Electronic Communications Act of 2005, which came into operation in July 2006.
• It is mandated to promote universal service and access in underserviced areas, advise government and Icasa on access policy, and administer the Universal Service and Access Fund, into which licensees contribute to subsidise the roll-out of networks in underserved communities.

According to the department of communications & digital technologies’ budget vote for the 2025/2026 financial year, Usaasa was allocated R268-million for its operations, while the Universal Service and Access Fund received R173-million “to advance digital inclusion initiatives in unconnected areas”.

Cull said the structural issues have been compounded by performance failures at Usaasa, with core tasks such as the definitions of “universal service” and “needy persons” – which Usaasa is meant to develop in collaboration with the communications minister – still non-existent.

“There has been dysfunction that has resulted in real harm to South Africa’s goal of connecting underserved communities,” he said.

‘Uneven delivery’

Nomvuyiso Batyi, CEO of telecoms lobby group the Association of Comms & Technology (ACT), said the agency’s mandate under the Electronic Communications Act – to expand broadband access and support universal service objectives – remains compelling, but that delivery has been uneven and constrained by institutional uncertainty, capacity limits and ongoing restructuring.

Audit outcomes have improved from a “disclaimer” to “qualified” and, more recently, an unqualified opinion, but Batyi cautioned that this reflects strengthening governance compliance rather than sustained, large-scale developmental impact.

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Operationally, Usaasa is delivering – through targeted broadband roll-out, public Wi-Fi deployments and digital skills programmes – but the scale and pace remain modest relative to South Africa’s connectivity gaps, she said.

Batyi drew an unfavourable comparison with established international universal service and broadband delivery frameworks, including the US Federal Communications Commission’s Universal Service Fund and the UK’s Building Digital UK programme.

South Africa’s current model, she said, reflects weaker institutional continuity, fragmented execution and limited alignment between funding, outputs and measurable outcomes. Reporting tends to focus on activities and processes rather than on tangible developmental outcomes such as actual usage, service reliability, affordability and the sustainability of deployed infrastructure.

The department of communications has acknowledged the underperformance and intends to incorporate Usaasa under a new Digital Development Challenge Fund (DDCF), with a bill expected to be tabled for public comment later this year, according to Cull.

A new broadband connectivity report released by the Development Bank of Southern Africa last month noted that more than 98% of South Africans have access to 4G coverage, but actual usage lags significantly. Cull said this suggests a rethink of how Usaasa funds are allocated, with a device and data subsidy for indigent South Africans among the options under consideration.

What is needed, he said, is substantial reform of the institutional and legal framework around universal service and access – including updated definitions, proper coverage mapping by Icasa and use of the powers already conferred by the Electronic Communications Act to build a workable framework.

‘Evolving’

Usaasa communications specialist Keitumetse Maloka said the agency is “evolving its approach” based on a “reform-orientated” strategy, with the missing definitions Cull referred to among the key deliverables in Usaasa’s performance plan for the 2027 financial year. As an implementing agency, Usaasa does not pronounce on policy-level decisions such as the move to subsume it into the proposed DDCF, she said.

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“However, the agency stands ready to support the policymaking process through evidence-based recommendations, should it be called upon to do so. Such changes would necessarily require amendments to the governing legislation,” said Maloka.  – (c) 2026 NewsCentral Media