South Africa: Punching Below Its Weight in the Information Economy

Cape Town — Africans from other parts of the continent who visit South Africa for the first time are often impressed with the country’s apparently advanced technology and infrastructure. But the country has failed to capitalise on the information economy and has fallen behind nearly 20 African countries in failing to migrate to digital broadcasting, damaging its capacity for data-based economic growth.

So writes John Matisonn, journalist, author and a founding councillor of South Africa’s Independent Broadcasting Authority in the democratic era. This column comprises excerpts from his new book, Cyril’s Choices.

The first African smartphone factory was opened in Durban in October 2019, with an investment of U.S. $100 million by an innovative Rwandan company. Whether this particular example of audacity succeeds or not, it shines a well-timed light on the sector best placed to create new jobs quickly: the information economy. The Rwandans picked Durban, a city most in the news in that year for scandalous tales about its tainted former mayor. On a recent visit, I was pleasantly surprised to discover that Durban is on the cusp of a revival.

The information economy has the potential to be an excellent driver of growth and job creation. Growth in the information economy is not jobless growth. Information is the oil of the modern economy. This sector adds good, above-ground, future-oriented jobs that inspire young people.

The information economy is not to be confused with the fourth industrial revolution (4IR). It’s the third industrial revolution, the computer or digital revolution, also described as the convergence of telecommunications, broadcasting and computers. 4IR is characterised by the arrival of artificial intelligence, machine learning, gene sequencing and nanotechnology. 4IR is the current international fad, but South Africa cannot properly capitalise on it without first confronting and fixing its blunders over the third.

The story of South Africa’s failure to properly capitalise on the information economy is regarded as a truism in the industry. There were many missteps in the 1990s… [b]ut now the sector’s biggest stumbling block is the failure to issue new frequency spectrum, substantially though not entirely because of a decades-long delay in what is called digital migration.

Migration will move free-to-air television, SABC 1, 2 and 3 and e.tv, from current analogue transmission to a digitised alternative. This will free up valuable frequency spectrum because digitisation compresses the signal so that it can be used more economically.

This liberated spectrum is badly needed to meet the consumers’ voracious demand for data. Failure to migrate is a major reason South Africa’s cellphone and internet usage costs are so much higher, and speeds slower, than other countries, including some in Africa with fewer resources.

There are 142 countries that provide mobile telephony more cheaply than South Africa. A number are in Africa and some are improving faster. The gap is wide. Japan, for example, paid 0.11 U.S. cents in 2004 for the same 3GB bandwidth South Africa paid 87.54 U.S .cents in 2006. We’ve been wickedly expensive.

No new frequency spectrum has been issued in South Africa for 14 years, despite the rapid growth in demand. The latest deadline for migration is July 2020, but there is reason to doubt even this one will be met.

The delays were caused mainly by corruption and squabbles over who will benefit most from contracts to build the TV set-top boxes. Policy-makers inside the ruling ANC took sides between parties. Hundreds of thousands of these boxes were built and gathered dust in warehouses while, depending on future policy decisions, they may prove to be outdated.

The benefits of cheaper and faster data costs are obvious. “Addressing the scarcity (of spectrum) is crucial to the economy, as wider, cheaper and more efficient network coverage would stimulate innovation, create jobs and ease the cost of doing business in South Africa, attracting more investment into the country,” wrote Mariam Isa, a senior financial journalist.

The mobile ecosystem added $28.5 billion to the South African economy in 2018, according to The Global System for Mobile Communications (GSMA). Productivity benefited, but the absence of 5G spectrum allocation slows down the Internet of Things, which includes smart cities and self-driving cars. Releasing 5G spectrum will bring $5.2 billion in investment, according to GSMA , a trade body representing the worldwide interests of the industry.

Heads should have rolled

The digital migration saga is perfect testimony to the cost of delay. Even bad decisions can be better than endlessly delayed ones. This level of delay is unprofessional if not suicidal in a rapidly evolving field like ICT.

The year 2019 ends with South Africa still in violation of the International Telecom-munications Union’s July 2015 deadline for the country’s migration. Lesotho, Swaziland, Malawi, Tanzania, Kenya, Uganda, Rwanda, the Democratic Republic of Congo, Congo Brazzaville and Mauritius are among 15 African countries that com-pleted migration by the time of a February 2018 ITU report. Namibia and Mozambique have since migrated.

South Africa has steadily slid down global ICT indices and is now ranked 92nd out of 176 countries in the ITU’s 2017 ICT Development Index. The GSMA’s 2017 Mobile Connectivity Index ranks South Africa 90th out of 163 countries. Note that South Africa is ranked as the world’s 33rd largest economy. We are punching below our weight. Heads should have rolled.

South Africa’s failure to deliver was awfully damaging to the sector. I knew several people who left the country because their start-up internet projects could not survive the slow speed and high cost of South African internet. They concluded that government was not prioritising outcomes. To succeed, you needed to go to India, the United Kingdom, Silicon Valley or any number of other places.

During the past 25 years, politicians have talked glibly about closing the “digital divide”, about digital migration, and the information economy. Too often this has just been sloganeering. The solution of 2000 is the blunder of 2019. This is a cardinal fact that policy-makers must face up to or more failed job-creation targets are guaranteed.

This waste is particularly poignant because the opportunity is so great. The information economy creates good, above-ground jobs that will excite presently unemployed young people because it makes them part of the modern world. As a bonus, information doesn’t pump climate-corroding carbon into the atmosphere.

There is a new opportunity under President Cyril Ramaphosa and it needs to be embraced.

South Africa cannot have rapid growth and job creation if government continues to operate at this tortoise pace. The price of a supercharged, job-creating information economy is to use some political capital to take a bold decision.

Why did a sector with so much potential go wrong?

The government of President Thabo Mbeki, who took a personal interest in its progress, presided over damaging political interference, without efficient policy implementation. Then it got worse. Mbeki’s successor, President Jacob Zuma, changed communications ministers on an average of once a year.

Equally scandalously, he split the ministry into two, when the whole point of the information economy is that the previously separate sectors of broadcasting, telecommunications and IT have converged. The industry was aghast. So were the public interest lobbying groups and think tanks, but their views carried no weight.

Ramaphosa mercifully reunited the separated ministries, and the government is trying to fix the sector, but government does not yet speak with one voice, even on the question of the sector’s potential.

The 4th Industrial Revolution “not good for jobs”

4IR has now become a fashionable talking point in Washington and Davos. Klaus Schwab, the founder of the World Economic Forum, which meets in Davos every January, has presented it as a set of technologies that can propel countries into a new age of unprecedented economic prosperity.

4IR includes artificial intelligence (AI), robotics, virtual and augmented reality, the Internet of Things, and blockchain. The Government’s Department of Communications hired the consulting firm Accenture to prepare a framework which said 4IR can contribute $330 billion worth of social and economic value and create four million jobs in the next ten years.

But the latest 2019 research shows that of all recent technologies, South African industry has received 4IR with the least enthusiasm.

“Traditionally, intended uptake of new technologies shot up once education, awareness and knowledge increased,” said the principal analyst of the research, Arthur Goldstuck, managing director of World Wide Worx. “Now, however, we are seeing the flip side of the coin. A year ago, 63% of those not using AI said they planned to use it in the future, and not a single company cited cost as a reason not to do so. A year and much hype later, the market seems to have woken up to the realities of obstacles like skills and cost, and the proportion planning to use it has plunged.” Blockchain is used by less than 10% of respondents.

A few elements in 4IR are in use in South Africa, and that is not a good thing for jobs. The uptake in robotics, which replaces people with machines, is most noticeable in legal services and mining. Lawyers are replacing new graduates with robots. Mining is replacing workers by automating both dangerous and routine processes, like drilling and sorting. “This, of course, is the fundamental challenge of the fourth industrial revolution,” Goldstuck said.

One area where South Africa is really big in 4IR is in the Internet of Things, but this is largely used to track vehicles and manage fleets.

Goldstuck’s concern reflects the impact of robotics on jobs. This is more than an economic or South African fear. Robotics, automation, has helped cut jobs around the world, and fuelled the anti-immigration populism that elevated Donald Trump and Brexit to political prominence during this 2016-2019 period of instability. This is so even where no immigrants are to be found. Where jobs disappear, poor political leadership risks anti-immigration racism and xenophobia.

South Africans who have been immersed in this sector from the beginning ask why Accenture did not make more effort to understand why the third industrial revolution fared so poorly.

Accenture’s report observes that for its lofty goals to be achieved, South Africa will have to meet conditions like improved connectivity, effective regulation and functioning markets. “…Like other reports from the slick international consultants over the years… it does not ask why previous rounds of market reform weren’t successfully implemented,” writes Alison Gillwald of the University of Cape Town, executive director of research at ICT Africa, and chairperson of the digital panel that determined the migration process in 2000.

“There is no reference to the absence of institutional endowments necessary to implement so-called international best practice in most African countries,” she adds.

Time to fix what what’s broken in the 3rd Industrial Revolution

Schwab did, in fact, say it was essential for countries in the Global South to close the gaps which contribute to developing countries’ “data deficit” to take advantage of 4IR . In his book The Fourth Industrial Revolution he expressed concern about the impact of automation in some countries. Policy-makers ought to heed his fine-print warnings as much as his bold globe-changing dreams.

It’s time to move on from the mantras of 4IR and removing “the triple challenges of poverty, unemployment and inequality” without workable, tested plans. It’s time to fix what’s broken in the third industrial revolution before making untested promises for the fourth.

Digital migration and the release of more spectrum is so important that the public needs to keep a firm eye on progress and hold politicians accountable for keeping their promises. Cheaper and faster data costs will benefit all manner of people, urban and rural. New jobs will come from call centres, software, and all kinds of new, African-appropriate tech solutions.

I have been pleased to discover places where this is happening despite slow policy reform. The potential is immense.

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