2011 Budget woefully inadequate

Pravin Gordhan

Although there are a number of positive elements in the 2011 Budget it is clear that the development of the ICT sector in South Africa is not a priority for the treasury. The National Treasury allocated R100million to “Broadband ICT” in 2011/2012, increasing the amount to R150million in 2012/2013 and R200million in 2013/2014.

In total R450 million has been allocated to develop the broadband strategy, the broadband policy of government, and the broadband infrastructure and services in underserviced and rural areas.

This may seem like a big number but to put it in perspective, there are probably more than 100 companies in South Africa who’s total ICT budget exceed R400 million, each. R400 million is a very small number and only R100 million will actually benefit businesses. The rest will be spent on government and rural areas.

“An affordable, efficient and widely distributed telecommunications network is important for raising productivity and accelerating economic growth. South Africa’s telecommunications infrastructure has improved significantly over the past few years. Two new undersea cable networks (SEACOM and EASSy) have increased available bandwidth. This has contributed to faster internet speeds and lower prices,” the 2011 Budget Review said. These sentiments as expressed by the Budget Review are to be applauded but there are some serious challenges before we can get there. Our cost of bandwidth is still extremely high and the infrastructure to grow our broadband is sorely lacking. One just has to take a drive through town to see almost every telephone pole without any telephone cables. Why? because they have been stolen and Telkom refuses to replace them. Without fixed lines we cannot deliver broadband and as a country we are missing out on the enormous growth that broadband has delivered to first world economies. Due to the lack of fixed lines many people and businesses are relying on mobile connectivity (3G) and this picture is even worse.

The quality of our mobile data connectivity has seriously deteriorated over the past few months and  there are no answers coming from Vodacom, MTN or Cell C. Yesterday I had to make 5 phone calls to complete one call. A call that should have taken no more than 10 minutes ended up taking 25 minutes to complete and probably cost 5 times as much. This is happening so often that I am starting to think that it’s being done on purpose in order to make more money from consumers. We must have one of the worst mobile infrastructures in the world and an even worse fixed line infrastructure. The amount of R100 million is a pittance compared to what we need.

At least the Budget Review acknowledged that “The cost of internet access, however, remains high and penetration is still relatively low. Only a quarter of broadband subscribers have fixed-line (ADSL) connections. Fixed-line broadband technology is cheaper and faster than wireless technology.” Even though government acknowledges these problems too little is being done to fix the problems. It seems that government is still not realising that implementing a proper, workable broadband strategy will unlock SME growth and job creation as well as increase foreign investment. I know of at least 2 multi-billion rand investments that were cancelled due to the lack of proper broadband in SA.

The answer is to break the Telkom monopoly on fixed line infrastructure. According to the Treasury, Telkom’s monopoly of the local loop – the last stretch of infrastructure connecting homes or businesses to exchanges – means that fixed-line prices remain high.

In my opinion we must build and repair the fixed line infrastructure and use technology effectively to prevent cable theft. We must reduce (control) the cost of bandwidth and reign in the mobile monopolies to reduce mobile charges.

If government is serious they could fix this problem fairly quickly, but it seems that they do not see it as a high priority, probably because they don’t understand the potential spin-offs and benefits that it will bring. In Mr. Pravin Gordhan’s speech all the right noises were made but it’s not backed up with workable plans and certainly not with enough money.

So in a nutshell, what will this budget mean for ICT and for broadband?… very little I am afraid.

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