Close Menu
TechCentralTechCentral

    Subscribe to the newsletter

    Get the best South African technology news and analysis delivered to your e-mail inbox every morning.

    Facebook X (Twitter) YouTube LinkedIn
    WhatsApp Facebook X (Twitter) LinkedIn YouTube
    TechCentralTechCentral
    • News

      The internet’s weakest link is under the ocean

      17 July 2025

      AI misuse shakes South African courtrooms

      17 July 2025

      Boom gates go hi-tech at South African malls

      17 July 2025

      Megayachts and mansions: the lavish life of 80-year-old Larry Ellison

      17 July 2025

      Mobile money lifts Africa savings to decade high

      17 July 2025
    • World

      Grok 4 arrives with bold claims and fresh controversy

      10 July 2025

      Samsung’s bet on folding phones faces major test

      10 July 2025

      Bitcoin pushes higher into record territory

      10 July 2025

      OpenAI to launch web browser in direct challenge to Google Chrome

      10 July 2025

      Cupertino vs Brussels: Apple challenges Big Tech crackdown

      7 July 2025
    • In-depth

      The 1940s visionary who imagined the Information Age

      14 July 2025

      MultiChoice is working on a wholesale overhaul of DStv

      10 July 2025

      Siemens is battling Big Tech for AI supremacy in factories

      24 June 2025

      The algorithm will sing now: why musicians should be worried about AI

      20 June 2025

      Meta bets $72-billion on AI – and investors love it

      17 June 2025
    • TCS

      TCS+ | Samsung unveils significant new safety feature for Galaxy A-series phones

      16 July 2025

      TCS+ | MVNX on the opportunities in South Africa’s booming MVNO market

      11 July 2025

      TCS | Connecting Saffas – Renier Lombard on The Lekker Network

      7 July 2025

      TechCentral Nexus S0E4: Takealot’s big Post Office jobs plan

      4 July 2025

      TCS | Tech, townships and tenacity: Spar’s plan to win with Spar2U

      3 July 2025
    • Opinion

      A smarter approach to digital transformation in ICT distribution

      15 July 2025

      In defence of equity alternatives for BEE

      30 June 2025

      E-commerce in ICT distribution: enabler or disruptor?

      30 June 2025

      South Africa pioneered drone laws a decade ago – now it must catch up

      17 June 2025

      AI and the future of ICT distribution

      16 June 2025
    • Company Hubs
      • Africa Data Centres
      • AfriGIS
      • Altron Digital Business
      • Altron Document Solutions
      • Altron Group
      • Arctic Wolf
      • AvertITD
      • Braintree
      • CallMiner
      • CambriLearn
      • CYBER1 Solutions
      • Digicloud Africa
      • Digimune
      • Domains.co.za
      • ESET
      • Euphoria Telecom
      • Incredible Business
      • iONLINE
      • Iris Network Systems
      • LSD Open
      • NEC XON
      • Network Platforms
      • Next DLP
      • Ovations
      • Paracon
      • Paratus
      • Q-KON
      • SevenC
      • SkyWire
      • Solid8 Technologies
      • Telit Cinterion
      • Tenable
      • Vertiv
      • Videri Digital
      • Wipro
      • Workday
    • Sections
      • AI and machine learning
      • Banking
      • Broadcasting and Media
      • Cloud services
      • Contact centres and CX
      • Cryptocurrencies
      • Education and skills
      • Electronics and hardware
      • Energy and sustainability
      • Enterprise software
      • Fintech
      • Information security
      • Internet and connectivity
      • Internet of Things
      • Investment
      • IT services
      • Lifestyle
      • Motoring
      • Public sector
      • Retail and e-commerce
      • Science
      • SMEs and start-ups
      • Social media
      • Talent and leadership
      • Telecoms
    • Events
    • Advertise
    TechCentralTechCentral
    Home » Martin van Staden » Ramaphosa’s pseudo-economics won’t lower data prices by 2024

    Ramaphosa’s pseudo-economics won’t lower data prices by 2024

    By Martin van Staden21 December 2020
    Twitter LinkedIn Facebook WhatsApp Email Telegram Copy Link
    News Alerts
    WhatsApp
    The author, Martin van Staden, says

    President Cyril Ramaphosa recently directed communications minister Stella Ndabeni-Abrahams to cut the price of data by 50% by 2024. This not only shows that government thinks it is immune to the laws of economics, but also that it operates under the assumption that it can solve a problem it helped create. Only an economy freed from the pseudo-economics of misguided public policy will deliver the lower data prices everyone wants.

    It is generally assumed that that the perceived high price of data in South Africa is due to the arbitrary greed of data providers. While there is always (rightly) a measure of self-interest at play, this assumption fails to capture a host of factors that contribute to the cost of data in South Africa.

    The compliance costs on the data industry are great and increase every year. There have been proposals that data providers and mobile network operators be compelled to provide free data to some educational institutions. If certain recently proposed amendments to the Electronic Communications Act are to be enacted, data providers will also be compelled to share the infrastructure in which they invested billions of rands with their competitors.

    Instead of creating a regulatory environment conducive to lower data prices, the minister is meant to force data prices down…

    This infrastructure was built by network operators — private companies — not government patronage. Load shedding and theft are constant threats to data networks for which the providers have to pay. The poor state of our economy – another result of ill-conceived government policy, particularly the Covid-19 lockdown – exacerbates matters. With less money in the economy, it follows that all enterprises, not excepting the data industry, are suffering.

    Other factors such as South Africa’s low-density population means that a single data-transmitting tower covers fewer people in rural areas. This means the cost per gigabyte is higher, as in some areas data providers cannot commercially justify the construction of more towers.

    Price controls

    Part of Ramaphosa’s direction to Ndabeni-Abrahams is to enforce price control of data. In other words, instead of creating a regulatory environment conducive to lower data prices, she is meant to force data prices down without addressing the root causes of why they may be relatively high in the first place.

    Her department’s hogging of radio frequency spectrum – necessary for providers to increase capacity and lower costs – goes a long way to keeping prices artificially high. Rather the minister auction off all available spectrum than engage in destructive market interference.

    Indeed, prices are an economic and not a political phenomenon determined by forces like supply and demand and scarcity and abundance. This means that when one tries to use political will to determine prices, various unforeseen and usually unintended – invariably detrimental – consequences result.

    Stella Ndabeni-Abrahams. Image: GCIS

    Thus, even if government diktat succeeds in superficially lowering data prices, there will be downstream repercussions. In a few years, for instance, we might notice the quality of our data connections are not on par with those elsewhere in the world because data providers will be less inclined to invest in infrastructure. Heaven forbid that government should attempt nationalise the infrastructure as it planned to several years ago, as this would be disastrous for consumers. This is only one example of an unforeseen, unintended outcome that can result from artificial meddling in the price signal.

    Data providers do not want prohibitive prices. If A and B can afford the high price of R150/GB, but all the other 26 letters of the alphabet can only afford R50/GB, a data provider will only have R300. But if they could lower their price to R50/GB, they would have R1 300. It is in the interest of data providers to keep their costs as low as possible to ensure they have as the widest possible market penetration. They also don’t want their customers only buying 1GB/month, but multiple, as that means more revenue. There is no rational reason for data providers to have prices so prohibitively high that most consumers are excluded. In other words, their prices are high due to factors beyond their control.

    Government’s track record in competition policy does not bode well for the data market. It believes more regulation will increase competition

    Ndabeni-Abrahams was also directed to have the Electronic Communications Act amended to fix competition issues in the data industry. Government’s track record in competition policy does not bode well for the data market. Traditionally, government believes that more regulation will increase competition. In 2020, for instance, we saw the Gauteng Township Economic Development Bill, which proposes to outlaw retail competition from foreign nationals in South Africa’s townships – a perverted conception of increasing competitiveness if ever there was one.

    But if the minister truly wants to grease the wheels of competition in the telecommunications industry, she should set about dismantling the various regulatory burdens that are at best inconvenient for the big data players, but insurmountable to any entrepreneur who may want to break into the industry. A good start will be to abandon any notion of price control.

    Above all, however, the government in general must embark upon a programme of wholesale deregulation, privatisation and liberalisation across the length and breadth of the economy, to ensure economic growth, investment and freedom of choice for consumers. This is the solution to any issues we might have with highly priced goods or services.

    • Martin van Staden sits on the executive committee and the Rule of Law Board of Advisors of the Free Market Foundation. He is pursuing a doctorate in law at the University of Pretoria and is co-author of The Real Digital Divide: South Africa’s ICT Policy (2017)


    Cyril Ramaphosa Free Market Foundation Martin van Staden Stella Ndabeni-Abrahams top
    Subscribe to TechCentral Subscribe to TechCentral
    Share. Facebook Twitter LinkedIn WhatsApp Telegram Email Copy Link
    Previous ArticleMTN launches cross-border airtime purchases
    Next Article Comparing Microsoft 365 and Microsoft Azure

    Related Posts

    South Africa loosens media ownership rules – but keeps one hand on the remote

    16 July 2025

    Trump tariffs could wreck South Africa’s vehicle manufacturing industry

    14 July 2025

    Still in play: Ramaphosa banks on talks to ease US tariff blow

    8 July 2025
    Company News

    SA businesses embrace gen AI – but strategy and skills are lagging

    17 July 2025

    Ransomware in South Africa: the human factor behind the growing crisis

    16 July 2025

    Mental wellness at scale: how Mac fuels October Health’s mission

    15 July 2025
    Opinion

    A smarter approach to digital transformation in ICT distribution

    15 July 2025

    In defence of equity alternatives for BEE

    30 June 2025

    E-commerce in ICT distribution: enabler or disruptor?

    30 June 2025

    Subscribe to Updates

    Get the best South African technology news and analysis delivered to your e-mail inbox every morning.

    © 2009 - 2025 NewsCentral Media

    Type above and press Enter to search. Press Esc to cancel.