Insights

Budget allocations for SA's broadband expansion

2017/18 South African National Budget Expectations

In December 2013, Cabinet approved the SA Connect policy, the broadband rollout plan which aims to deliver fast, affordable internet across the country by 2020. SA Connect’s first phase would bring broadband to schools, health facilities, government offices, Thusong Centres and post offices in eight rural district municipalities.

The policy was considered so important that it was included as part of the Nine-Point Plan announced by President Jacob Zuma in his State of the Nation address in 2015. In the following year, 2016’s State of the Nation address promised that government would “fast track the implementation of the first phase of broadband rollout to connect more than 5 000 government facilities in eight district municipalities over a three-year period”.

In 2015, National Treasury announced it would put aside R1.1 billion in funding for SA Connect over the next three years, up from R740-million, and in the 2016 Budget, a further R500 million was allocated.

Clearly, broadband is viewed as a priority for service delivery, although there was criticism last year that even R1.6 billion is not enough, given the magnitude of the task. Despite budget resource allocation and prioritisation attached to this programme, plagued by a multitude of problems, the rollout of broadband has essentially been stalled.

Late last year the State IT Agency (SITA) decided to cancel the tender for this service, stating reasons of a lack of qualified bidders. It is not clear now how government will proceed, but it is critical that we start to see some accelerated progress on expanding overall access to broadband services including into underserved areas in the townships and rural areas.

It is well-known that broadband has powerful economic effects, in that it promotes productivity and innovation, but it can also play an important role in delivering social services and alleviate social inequality. 

India, which like South Africa suffers from enormous inequality, has instituted a “Digital India” programme which aims to bridge the divide between haves and have nots and create a digital society. The foundations of this programme are social media, mobility, analytics and cloud, in order to digitally empower citizens and provide governance and services on demand. It aims to extend the reach of government services to citizens even in remote areas, just as the SA Connect policy aims to do. Digital India’s flagship fibre network has faced several delays, and is only expected to be complete in 2018/2019. However, other elements of the programme are progressing well, with e-government transactions increasing by 200% over two years, from 840-million to 2.6 billion in 2015, whilst in South Africa, the First Phase of the SA Connect rollout has still not been implemented.

In Australia, digital technologies are expected to contribute $139-billion in 2020, from $79-billion in 2014. This represents a growth rate of more than 75% and an increase in GDP contribution from 5% to 7%. Most of this growth – 97% - is expected to take place outside the traditional Information, Media and Telecommunications industry, demonstrating the pervasive influence of broadband on the overall economy and across multiple industry sectors.

Broadband connectivity is a fundamental component of the business process outsourcing (BPO) business.  South Africa’s BPO industry is a significant employer, creating 215 000 jobs and contributing R50 million annually to GDP. The local BPO industry grew 18% year-on-year between 2010 and 2012, on an estimated base revenue of $825 million in 2010, to $1.1 billion in 2012. In 2014, South Africa accounted for 1% of the global Business Process and Information Technology outsourcing market ($151 billion, 2010 prices) and has the potential to increase its market share by an additional 3% through to 2030.

However, the cost of communications, including broadband, impedes further growth of this industry, especially as South Africa competes against other emerging destinations such as Brazil, Ghana and Kenya. According to Gartner, the cost of telecoms services in South Africa is less competitive than the Philippines and India, two destinations with among the largest BPO industries.

South Africa’s BPO industry has been able to establish itself as a credible player internationally, and has seen good growth over the years. There is room for growth and potential to establish BPO businesses in townships which can further address the problem of youth unemployment.  However, as can be seen from the examples of Australia and India, we can be much more ambitious in our broadband planning.

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