South Africa has failed to harness the digital revolution: how can it fix the problem?

Posted on November 20, 2020

The COVID-19 pandemic has precipitated a migration from physical work spaces in many sectors of the economy to online, digital services, supported by staff working from home. Parts of the economy such as mining, manufacturing and hospitality still require workers to be physically present. But other sectors have discovered that virtual platforms are effective substitutes for offices.

Online, however, requires digital infrastructure and services in information and communication technology (ICT). Digital infrastructure is essential to meet the new demand for virtual services as quickly and cheaply as possible. On top of this the potential of digital technologies to support economic growth is apparent. Many developing countries have comprehensive national strategies and initiatives to foster data mining, digital intelligence, e-government and e-commerce. These include India and China.

A number of countries have successfully harnessed the digital revolution to enable broader socio-economic development. But South Africa has fallen behind. It has slid down the International Telecommunications Union’s Information Society Index. The index measures countries’ evolution towards becoming information societies based on three measures: readiness, intensity and impact. For instance, readiness is measured through indicators of access and skills. The 2018 index places South Africa 104th out of 144 countries in terms of access to fixed broadband, down from 77th in 2002.

So what’s gone wrong?

The “managed” liberalisation of the incumbent telecommunications provider, Telkom, has been ill-fated. The idea was that this would accelerate the development of the sector and enable affordable access to communication services. But broadband speeds are 10% of those in countries such as South Korea and Singapore.

South Africa has a suitable policy framework and the skills necessary for a digital transformation. But instead of opening the fixed line market, the privatisation of Telkom resulted in a listed company with a protected monopoly. Together with a weak and ineffectual regulator, Telkom successfully prevented the licensing of a second network operator. It also blocked steps towards healthy competition. This included refusing to support local loop unbundling and the sharing of the fixed line infrastructure.

In a recent policy research paper we set out how the local digital industry can be stimulated. We address the question: does South Africa need new instruments, or can traditional policies suffice?

Failures and successes

The 2013 National Broadband Policy, known as “South Africa Connect”, is seen as a competent guide for South Africa’s digital development. For instance, the World Bank’s Broadband Commission for Digital Development remarked that South Africa Connect provides an excellent example of a policy which focuses on both supply-side and demand-side considerations.

But a number of factors have got in the way of digital transformation.

One was lack of continuity in the political and administrative leadership of the national ICT portfolio. Between 2009 and 2018 South Africa had 11 different ministers responsible for telecommunications. In the same time, it had only four presidents.

Another was the ill-considered splitting of the ICT portfolio over two departments under the previous administration. This caused divergence between telecommunication, broadcasting and information technology and hindered the progress of South Africa Connect.

A third factor was a conflict of interest between the regulator and the state as the major shareholder of Telkom. The Department of Communication was the custodian of the state’s share in the privatised Telkom. But it was also responsible for the policy and regulatory environment in which the company operated.

And finally, it is reported that political appointments in key agencies such as ICASA (the regulator) and the Universal Service and Access Agency of South Africa have limited capacity.

Despite the governance issues, South Africa has achieved some notable successes.

For example, it has created a world-class research and education network. The South African National Research Network provides gigabit per second networking to all South African institutions of higher learning as well as science councils and national research facilities.

The model is based on aggregating demand from similar users and buying long-term high-capacity leased line or dark fibre network capacity on a competitive basis from network operators. It combines this with a policy of always buying bandwidth levels based on future and unanticipated requirement levels.

This has been key to its success. The network has been central to the digitalisation of higher education. It now plays a vital role in the sector’s migration to online platforms. The graphs below show how the lockdown disrupted the network’s usual support for internet traffic, leading to a massive migration to commercial networks.

SANReN’s support for Internet Traffic

Screenshot

Screenshot

What’s needed

The key is to have a policy that is a mixture of supply- and demand-side interventions. Supply-side measures reduce costs for firms. Demand-side refers to policies that stimulate demand.

On the supply side, the state needs to invest in a low-cost, high-speed and universally accessible data transmission infrastructure. This should be coupled with support for domestic digital firms and entrepreneurs through public procurement processes aimed at improving government services.

Estonia is a good example of how a combination of policies can enable an advanced digital economy. On the demand side, the government has ensured decentralisation, interconnectivity, integrity, open platform, once-only and transparency. The open platform principle ensures that any institution can use the infrastructure. Once-only ensures that users are never asked to enter the same information twice.

Estonia’s approach resulted in a different architecture from the US. There the emphasis has been on personalisation, anonymity, information privatisation, and competitive efficiency.

Aspects of the Estonian model rely on high levels of trust between private individuals and digital firms. It is also underpinned by an advanced capable state and a highly skilled workforce. These factors make it difficult for other countries to replicate.

Way forward

Developing countries need to be highly strategic in the development of their domestic digital industry. For example, developed countries like the US are capable of forcing an agenda on developing countries that permits the appropriation of local data, allows unrestricted repatriation of profits and prevents technology transfer.

Another important factor is that governments’ interventions in the digital space must be proportional to their technological capability. A capable state can be intimately involved and direct digital development. But where there is limited technological capability the focus should be on creating an enabling environment. This would include ensuring a level playing field, creating an open market, promoting healthy competition and providing the appropriate regulatory framework.

For South Africa, the focus must be on the development of a universally accessible data and digital public infrastructure. This should include high-speed broadband (more than 100 Mbytes per second), and support for domestic digital firms and entrepreneurs. This should be done through public procurement processes aimed at improving government services.

A number of other steps should be taken too. The first is to develop the skills for data mining and digital intelligence. The second is to put in place the regulatory framework to support systems for secure but low-cost e-transactions. The final step is to prevent the private appropriation of public data by global corporations.

Professor David Richard Walwyn is Professor of Technology Management and Laurens Cloete is a PhD candidate at the University of Pretoria.

- Author Professor David Richard Walwyn and Laurens Cloete.
Published by Hlengiwe Mnguni

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