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Time to free up SA’s telecoms market

South Africa will need to become Internet savvy in order to compete globally, argues ADRIAAN GIE, CEO of Plusto.com, a business-to-business e-trading platform launched to the SA, Indian and Chinese markets last month.

It is time for Communications Minister Ivy Matsepe-Casaburri to change her stance on South Africa’s telecoms legislation.

While South Africa may be a leader in internet connectivity across Africa, the country lags behind countries such as Morocco, Egypt and Nigeria in terms of market competitiveness.

A severely controlled and conservative telecoms legislation that repels competition leads to other service providers being shut out of the market while Telkom holds South Africans at ransom by charging exorbitant connectivity fees.

For too long the Minister has stifled economic growth in South Africa by refusing private companies entry to the market. If government’s focus is on increasing trade and commerce between South Africa and the rest of the world, then this is not the way to go about it. In addition, the price of broadband in South Africa is exorbitant compared with international standards:




The fastest broadband service in South Africa is Telkom’s DSL 4 mbps, which is priced at about R675 per month; this translates to a service cost of between R25 and R56 per Mbps for a 1GB cap. In countries were broadband has been unbundled to allow new entrants into the market, prices are 79 times less than in South Africa. The average cost per Mbps for a 1GB data limit in other countries is 0 – 71c.

Online trading is not going to plateau or slow down, it’s only going to keep increasing. In 2008, 1.5 billion people will be online and e-commerce between companies will reach $1 trillion. More-and-more, e-commerce is the preferred way of transacting internationally, especially in business.

In South Africa however, government has consistently dragged its feet in changing legislation. Neotel’s market entry is exciting but the lack of financial and infrastructural capacity will not allow it to take on the state backed Telkom for some time.

If the South African telecoms market is liberalised, one can foresee a high penetration of Internet users and more competition in the online business environment. Ordinary South Africans will also be able to access the Internet without being hindered by cost. The entry of private companies will avail cheaper and faster broadband at lower prices and will encourage more innovation in the industry. This will dramatically change South Africa’s stagnant telecoms growth.

In order for South Africa to be globally competitive, flexible telecoms regulations need to be put in place so as to allow SMEs to engage in e-commerce trade inexpensively. Brazilian internet users pay R843 monthly for a 50GB cap of broadband; in India the cost for 20GB is R658, while South Africans will part with R675 for 3GB. This explains why South Africa’s broadband penetration is a mere 1.9% compared to Brazil’s 4% and the country is ranked 51st by the World Economic Forum’s network readiness report for 2007-2008.

It seems South Africa will have to live with astronomical telecoms prices for some time, but there is a beacon of hope. A high court judge ruled in favour of a major telecoms company which pressed for open competition in the market. The Minister attempted to appeal the judgment but was unsuccessful, and she has until 21 November to exert her right to petition the Supreme Court of Appeal.

With the digital divide threatening to widen even further, SA will have to take swift action to ensure that a larger part of South Africa’s population has adequate access to the internet. South African internet costs are simply too high for both business and households.

We hope South Africa will soon be able to experience growth in terms of Internet penetration numbers. At the moment less than 10% of South African households have internet access. In the UK more than 50% of households have Internet access.

  • Plusto.com is a global online trading platform created to facilitate trade across the globe.



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The Big Change is a business strategy blog and newsletter published by Arthur Goldstuck, managing director of World Wide Worx, a leading technology research organisation based in Johannesburg, South Africa.

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