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12 August 2016

High-speed connectivity – key to economic prosperity


A country’s capacity to connect its economy to the Internet, and make these services available and accessible to its citizens and businesses, is key to its success in the digital age. Fresh from the relief that South Africa has dodged a ratings downgrade, at least for now, the latest Network Readiness Index from the World Economic Forum offers more heartening news, namely that South Africa is in fact improving in this regard. More particularly, the country has gained ten spots within the rankings, now sitting at 65th place.

No less encouraging is the reason behind this progress: improvements to infrastructure and affordability. On both fronts gains are being made. In Johannesburg it is difficult to drive through a neighbourhood, at least in the northern suburbs, and miss the many trenches being dug for optical fibre cables. On the affordability front, we have also slowly but steadily seen the positive impact that increased competition is bringing to the market, with high-speed connectivity becoming considerably more palatable financially than it was two years ago.

Business driving progress

Not the least bit surprising is that businesses appear to be driving digital transformation in the country. In the Network Readiness Index, South Africa’s best rating by a wide margin was for business usage, coming in at 32nd.

At DFA we have seen a clear indication of the pivotal role businesses are playing in accelerating digital transformation over the past two years. In 2014 we connected 1181 buildings and 3966 end points. Last year those figures almost doubled and tripled respectively, with 2046 buildings and 11 706 end points being connected.

Clearly, small and medium enterprises have a key role to play in South Africa’s development, and it is well within all our interests that this momentum of fibre to the business (FTTB) continues unimpeded. Indeed, one of the key findings in the Index is that businesses will need to innovate continuously, and this is fueled by high levels of business ICT adoption. Network stability and high-speed connectivity are both critical to ICT adoption and to innovating in a digital age – a fact that cannot be overstated.

Gains and benefits

Even as deploying widespread connectivity throughout the country is not a small task, ensuring that FTTB deployment continues on an upward trajectory is largely expected to be well worth the effort. According to the World Bank, every 10% increase in high-speed connectivity in a developing country might result in a 1.3% increase in GDP.

More particularly, auditing and consulting company Deloitte has noted that if developing countries, such as those in Africa, could bridge the gap in Internet penetration to reach levels that developed economies enjoy today, they would experience significant benefits. These include large increases in GDP growth and productivity along with improvements in health conditions and education opportunities.

The Department of Telecommunications appears to be cognisant of the pivotal role that high-speed connectivity plays in fostering economic growth. Earlier this year it announced that, under its SA Connect programme, R1.6 billion has been allocated to the national broadband infrastructure network programme.

On the down side, the World Economic Forum pointed out that innovation and the business environment in South Africa seems to be on the decline – especially regarding technology and venture capital availability, government procurement of the latest technologies, and procedures to start a business. As noted, it would be unfortunate if these impediments hampered further investment in infrastructure, especially as infrastructure remains one of the keys that has enabled the country to enjoy an increase in international Internet bandwidth.

Misses and losses

The Index also found that governments and businesses alike are still missing out on a growing digital and mobile-savvy population. This is despite the fact that mobile tariffs have more than halved and broadband tariffs dropped slightly, reducing barriers to adoption also in terms of affordability.

Furthermore, skills, or the lack thereof, is still South Africa’s Achilles’ heel, ranked 95th, even as infrastructure and affordability improvements pushed the country up in the overall ranking. This points at another major issue where there is much room for improvement.

Call to action

Even as individual countries grapple with network readiness in their own unique way, clearly South Africa still needs to address its pain points of limited skills, the need for adequate education to ensure digital skills in the long run, and reversing a seemingly unfriendly business-creation and -investment environment.

At a time when the country’s economy has contracted with fears about a looming recession, decisive stakeholders need to take decisive action to use every advantage to its fullest. Connectivity plays a key role here, particularly with regards to enabling new businesses to grow and existing businesses to more fully take advantage of the digital economy – and thus foster employment.

Doing so should not only go a long way towards addressing the single biggest concern in South Africa with regards to network readiness according to the Index – that of a deteriorating business and innovation environment – but also ultimately help spur on much-needed economic growth and African innovation once again.

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