It is hugely encouraging to see South Africa rising up the World Economic Forum’s latest global competitive rankings as a result of the strides the country has made in getting more people onto the Internet and at faster speeds.
It shows what is possible when competitive forces are set free. South Africa’s telecommunications industry today is robustly competitive, a stark change from just five years ago. Yet this has happened largely in spite of government, not because of it. With the right supporting policies in place, the sector has the potential to lead the transformation of the South African economy. Sadly, that might be expecting too much.
In case you missed the news earlier, South Africa has climbed seven places in the World Economic Forum’s Global Competitive Report 2015-2016.
The good performance is largely thanks to an increased uptake of information and communications technology (ICT), and specifically access to more Internet bandwidth.
Given private sector investment in recent years in undersea cables, in national and metropolitan fibre networks, and in fibre-to-the-home and mobile broadband infrastructure, perhaps we shouldn’t be surprised by the report’s findings. South Africans are taking advantage of better Internet infrastructure and the falling prices that have resulted from a rapid intensification in competition.
Historically, South Africa’s telecoms industry was dominated by a fixed-line monopoly in Telkom and a cosy duopoly comprising MTN and Vodacom. None of them competed too aggressively on retail prices. Consumers were the losers.
All that has changed dramatically in the past five years.
Telkom lost its monopoly over international bandwidth, and then over national and metropolitan networks. It’s now facing the first real challenge to its dominance of the “last mile” into homes and businesses.
In mobile, the licensing of Telkom Mobile, coupled with a Cell C that has decided it wants to compete aggressively for market share, ignited a price war.
Enforced cuts to wholesale internetwork call fees — so-called mobile termination rates — helped the smaller players to be much more competitive, taking the fight to MTN and Vodacom, which have been forced to react with lower prices for consumers. Credit here must go to communications regulator Icasa for intervening so forcefully on termination rates. Mobile data prices, however, remain prohibitively high.
The impact of all the competition is clear in the World Economic Forum’s latest report. But if the good news is to last, if South Africa is to repeat the performance in the years to come, government needs to come to the party — not by intervening in the sector, as some worry it’s planning to do — but by crafting policies that make it easier for telecoms companies to do business and to build the networks that South Africans demand.
For years, government has allowed the digital television migration project — so crucial for freeing up radio frequency spectrum for broadband — to stall. And it’s taken inexcusably long to develop policies on allocating spectrum and removing red tape in the way of rapid network deployment. In short, the sector has achieved what it has in recent years without the help of government. Imagine what it could achieve with the state helping to grease the wheels of competition.
Of course, great ICT infrastructure is only one component of creating a fast-growing and dynamic economy. The World Economic Forum report shows that in all too many areas, South Africa is still falling down — in some cases, badly so.
Although the country has an efficient stock market, strong domestic competition and efficient transport infrastructure, the report identifies onerous government regulation, crime, an inflexible labour market, inefficient electricity supply and lack of quality education as key stumbling blocks to improving competitiveness.
But at least the ICT sector is contributing (at last) to taking the country in the right direction. With the right support from government, it has the potential to be a template for how to get the rest of the economy onto a more competitive footing to the benefit of all South Africans. — © 2015 NewsCentral Media
- Duncan McLeod is TechCentral’s editor. Find him on Twitter
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