South Africa takes positive steps to close the digital divide

The South African Information and Communication Technologies (ICT) sector is well established and sophisticated.  The largest and most advanced in Africa, the local ICT industry is characterised by technology leadership, particularly in the field of mobile software and electronic banking services. South African companies are world leaders in pre-payment, revenue management and fraud prevention systems and in the manufacture of set-top boxes, all exported successfully to the rest of the world. However, despite the buoyancy of the sector and the dynamic growth experienced in South Africa’s ICT sector, the growth has not met the national objective of affordable access to the full range of communication services.

The Universal Service and Access Agency of South Africa (USAASA) requires at least R100 billion to close the ICT access gap in the country.  To raise the money, the agency has turned to its licensees, asking them to increase the levies they are paying to the Universal Service and Access Fund (USAF) from 0.2 percent to 1 percent. However, the mobile network providers, which are the biggest contributors to USAF have raised concerns over the urged hike in the levies.

USAF was established under the Electronic Communications Act (ECA) to fund projects and programmes that work towards achieving universal service and access to ICT by all South African citizens.  Although this is still under discussion with the relevant stakeholders, the Minister of Telecommunications and Postal Services said in his budget speech last year that government would review the levy for USAF to align South Africa to the 1 percent charged by developing countries.

There is approximately R2 billion ($126 million) in the USAF which has not yet been fully utilised. USAASA CEO Zami Nkosi described this as “a drop in the ocean” when one considers that the country needs R100 billion and more to close the ICT access gap.  The reality is that contributions have been on the decline while the gap has either remained the same or worsened in some parts of the country. He added that the allocation the agency receives from the Treasury has been dwindling over the years.

However, the turnaround plan implemented by USAASA is beginning to pay off as two clean audits were received for both USAASA and the Universal Service and Access Fund in the 2013/2014 financial year as well as the 2014/2015 financial year. Before the plan there were 19 CEOs in the space of 10 years, with the lack of controls leading to abuse and misuse of the agency’s funds. Employees were also not technically equipped to do their jobs properly.

In addition to providing telecoms infrastructure in underserviced parts of South Africa, USAASA has been tasked with managing the roll-out of government-subsidised set-top boxes for digital terrestrial television migration—a process that has been mired in controversy. Now there is a positive vibe in USAASA with the successful launch of the initial set-top boxes in December 2015.  This is the first time in the history of USAASA that it will run and manage a project of this magnitude with a huge budget of about R1.4 billion.

The Minister’s announcement is in keeping with the proposals of the ICT policy review report.  Legislation allows for the collection of monies via the National Treasury and for its distribution.  However, the report recommends that USAF be transformed into the ICT Development Fund which will “allow for the aggregation of new incremental state funding with private sector and donor funding.”

Although there is still cautiousness and discussions around the levy increase as, the change is bound to have big implications for mobile operators in particular whose revenues run into tens of billions of rand, electronic communications legal specialist Lisa Thornton said the proposed increase in contributions is not out of line with other countries.  In Uganda and Nigeria, licensees pay 1 percent of their turnover to a universal licence fund. Tanzania and Kenya only pay 0.3 percent and 0.5 percent respectively—still more than the 0.2 percent paid by South African licensees.  However, licence holders in the United States pay 4 percent of their turnover, with India paying 5 percent and Malaysia 6 percent.

Given the challenges faced and those that still have to be faced related to human capital development, broadband readiness, e-skills, skills and training, accreditation, basic and higher education qualifications, human resource policies, transformation and black economic empowerment, as well as  urban and rural development; the window to address the digital divide is rapidly closing.

South Africa’s pace of economic growth and global competitiveness can only be improved by closing the digital divide. Some of the benefits will be lowered costs of communication, spectrum allocation to efficient service providers in a way that opens up the market to consumers, encouragement of competition among providers, the rapid roll-out of ICT infrastructure and the effective use of TV white spaces to enable fast and affordable Internet connections, and alsoregulation revision to make it easier for innovative entrepreneurs to develop and grow markets in the ICT sector in South Africa and abroad

Closing the digital gap in South Africa is crucial for the future development of the country and economic growth, innovation, production and cost-efficiency. There will also be significant opportunities for job creation, investment and exports. South Africa’s communications sector has been one of the fastest growing of the South African economy and accounts for about 10 percent of GDP.  As such, it is crucially important for South Africa to keep abreast of its digital communication needs— and as government has realised—the time for closing the digital gap is right now.