Pierre Heistein: SA digital commerce needs space to breathe

The economy is like the human body. Organs, limbs, systems and complex reactions interact to create an entity that operates with endless possibilities. Health is the ultimate goal and each component plays its part, fuelled by common necessities.

Improving your personal health can be complex, requiring large investments into fitness and paying close attention to your diet and everything you do and consume. Specific limbs may get damaged or organs fall ill and appropriate remedies need to be found. Other elements of good health are simple - like drinking enough water to avoid dehydration.

Picture: Credit: SXC.HU

When viewed like the human body, it’s easy to identify the elements that matter most to a healthy economy - those that do not target any one function but feed every part of the system to build a successful organism. It’s these core provisions that can unleash improvements to economic growth and welfare with relatively little investment. Breath through your nose with your mouth closed. Close one nostril. How long could you stay like that? How well could you operate?

South Africa’s economy is in a similar position and the most pressing lack of oxygen at the moment is data capacity. What makes it even more comparable is that breathing life into South Africa’s use of digital commerce does not require complex plans, policies or infrastructure - it simply requires the government to take the finger off its nostril.

Mobile data costs in South Africa are high. A study by Research ICT Africa found that South Africa’s cheapest 1GB data product ranks 19th among 49 African countries studied. It’s almost six times more expensive than Tanzania.

Most networks charge around R150 for a 1GB data basket, with the exception of MTN (R160) and Telkom Mobile, which charges R99. This excludes promotional products with limited validity, which reduce prices temporarily and effective prices of data are sometimes lower than the advertised price of 1GB.


Partly driving costs are large investments in network infrastructure (R20 billion between MTN and Vodacom this year) and the low returns of supplying rural areas. But the main bottleneck is the inflated cost of spectrum for wireless broadband services due to lack of availability. Wireless services compete with television broadcasting, which desperately needs to shift from analogue to digital.

The other obstacle is how the available 2.6GHz spectrum that is most suitable for LTE will be allocated. This is a political battle between the Minister of Telecommunications and Postal Services and the Independent Communications Authority of South Africa, which will play out in the Constitutional Court later this month.

While resolving these two issues come with their share of peculiarities, costs and conflicting interests, it's child's play compared with elaborate economic policies such as the Industrial Policy Action Plan, proposals to unlock the potential of small, medium and micro-sized enterprises or the roll-out of special economic zones. Yet, removing the restrictions to data use would be just as beneficial to the economy.

Cheaper data would be petrol to the fire of nascent industries. South Africa shares a time zone with Europe and speaks good English, positioning it perfectly for a vibrant call centre sector. Despite the barriers to telecoms infrastracture, international firms such as Lufthansa and Amazon have already invested in call centre hubs in Cape Town - cheaper data will accelerate this growth.

The ability to stream video and exchange documents at low cost will help drive digital work into more remote and poorer communities. Web design, programming, copy writing and video production will become relevant in these areas and promote new forms of entrepreneurship. Moving work to labour rather than vice versa would help break down the geographical inequality that was entrenched by the Group Areas Act.

Online education provides a ready solution to help fees fall, but without affordable data costs, initiatives by universities and private companies will suffocate. The world's economy is built upon binary and South Africa is no exception.

* Pierre Heistein is the instructor of UCT’s Applied Economics for Smart Decision Making course. Follow him on Twitter @PierreHeistein.

* The views expressed here do not necessarily reflect those of Independent Media.