SA politicians play a dangerous game - TechCentral

SA politicians play a dangerous game

Duncan McLeod

[By Duncan McLeod] Some commentators have speculated that the failure of talks between MTN and India’s Bharti Airtel points to a more protectionist approach by government. If so, it’s troubling. The country ought to be opening up to investors, not scaring them away.

In a statement, Bharti pinned the blame for the collapse of talks with MTN squarely on the SA government. Most analysts have suggested that both governments, South African and Indian, didn’t fully come to the table.

Whatever the case, communications minister Siphiwe Nyanda has been widely quoted as saying that because MTN is a local entity “it would be sad if we saw [it]move into the hands and management of foreign nationals”.

That’s a disturbing statement. It suggests that SA is closed to foreign investment if it means foreigners acquiring a controlling stake in an SA business.

If the minister meant what he said, Vodacom and Telkom must be pleased they managed to get their deal with the UK’s Vodafone concluded before the new administration took office.

I came across more of this protectionist thinking when last week I met new communications department director-general Mamodupi Mohlala. Though pragmatic on most issues — I think she’ll probably achieve more than her predecessor in dealing with SA’s high telecommunications costs — Mohlala trots out the same line as Nyanda when it comes to foreign investment.

I asked Mohlala for her views on regulations crafted by the Independent Communications Authority of SA (Icasa) that forbid local pay-TV operators from having more than 20% of their shares held by foreigners or foreign companies. I asked this in the context of Icasa’s failure to introduce meaningful competition to Naspers-controlled DStv operator MultiChoice.

Surely a foreign broadcaster with deep pockets is precisely what is needed to break MultiChoice’s stranglehold on the SA market?

“In an ideal world, that would be the solution, but we have to accept that SA is still a developing economy,” Mohlala said. “And being a developing economy, to open up the floodgates would pose a challenge.”

Really?

“This is not unique to SA: the US, in telecoms, has the same protections to ensure a national resource is kept in American hands.”

Oh, so we should copy the Americans?

“We’re not saying ‘no’ to foreign ownership. Most of our operators and entities have some foreign ownership,” Mohlala said. “But what are the risks of allowing foreign investors to set up majority-owned businesses here? It’s a national asset, for starters.”

How does one define a national asset? How is MTN a national asset? It’s not even SA’s largest mobile operator. And how is a small broadcaster, one that might not even survive, considered to be a national asset?

“You have to ensure there is protection of local [players and]… ensure these entities have the national interest at heart. You won’t have guarantees that the people they employ are South African. You assume that if the ownership is South African there will be an inclination to ensure that the best interests of SA are protected at all times.”

Oh, like Tiger Brands? Or Telkom? Or Eskom?

This protectionist thinking is unsettling. Just talking about it is enough to scare off the foreign investors we so desperately need.

In the end, do South Africans really care who owns the pay-TV service they watch or would they simply prefer a well-funded competitor to keep MultiChoice in check?

My guess is if Rupert Murdoch wanted to set up a BSkyB operation in SA, he’d be welcomed with open arms by consumers. Our politicians and government bureaucrats, on the other hand, are more likely to give him the cold shoulder.

  • This column is also published in the Financial Mail

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4 Comments

  1. Andy October (WirelessMonkey) on

    Telecoms globally has become a national asset that should be managed by governments with the people in mind. We’ve already allowed the Vodacom/Vodafone deal. This should not mean that we’re now selling off all our assets. I’m in agreement with government to be more rational. The unions also have a very valid fear – mergers always result in cost-saving measures, which translates directly to job losses, something we simply cannot afford right now. There are already sufficient foreign players in our local market, and I therefore support a wait-and-see approach before deposing of more assets.

  2. Mr McLeod. Firstly, it is important that we attribute the correct facts to the correct persons. The 20% Foreign ownership limitation you refer to applies to all commercial broadcasters, and not just pay-tv operators. Secondly, the limitation is imposed by section 64 of the Electronic Communications Act and not ICASA regulations. Thirdly, that Limitation is not a recent development and was there since IBA Act days.
    In essence, the rationale for the limitation was that in broadcasting, one needs to avoid the influx or undue influence of foreign views on the SOuth African audience, particularly given the importance of Media, specifically broadcasting, in shaping those ideas and contributing to the rebuilding of a prosperous South Africa. It is arguable that a foreign broadcaster would be concerned with achieving South Africas stated policy goals or objectives in putting together its service.

    But coming back to Telecoms, there isn’t a regulatory imposed limitation on the foreign ownership. There’s two statutory limitations though, first being the requirement that no less than 30% must be owned by HDI’s and the second being the provisions of the BBBEE Act and applicable codes, in the absence of the ICT charter.

    To discredit the protectionist approach without considering all the facts whilst making incorrect attributions for the sources of that strategy…..

  3. Hi Thato,

    Thank you for correcting me on the Section 64 limitation. I had thought it was an Icasa regulation when it came to pay-TV operators. My error.

    Perhaps (I’m far from convinced) there’s some merit in debating foreign ownership of free-to-air terrestrial broadcasters. But I don’t see why the same rule is applied to pay-TV operators.

    Rgds,
    Duncan

  4. India does nto allow dual listing but South Africa does. It is India that is way behind SA in terms of openness so the right decision was made.