The tale of doom and gloom about the uncompetitive South African telecoms market is all too familiar. It’s kept a stranglehold on internet growth in this country, meaning the country has performed way below its potential in this sphere in comparison to the rest of the world.

Arguably we are now moving in the right direction, and we should be headed for a belated boom in broadband connectivity. But it’s all going very slowly. And it’s hard to be anything but sceptical when every year we hear about the “potential” and how its all going to change. I’m sick of myself saying it too. I don’t believe me anymore.

It hit home for me in a big way when we hosted a delegation of chinese bloggers at 24.com. They were interested to know how we made online businesses in an entire market of only 5-million users. A single website over there with 4-million users, isn’t an attractive business they told me. They play in a market of something like 300-million internet users.

So I replied, to sceptical looks, that it’s not just about numbers and but about pricing and positioning — and there are good online businesses here. For example, the country has more internet users than countries such as Austria, Czech Republic. It’s way bigger than the offerings of New Zealand or Ireland (In fact double the size). The local online market is comparable to Switzerland, Belgium or Saudi Arabia. But still, it’s just not good enough and way below potential.

South Africa not the biggest African country
Despite South Africa being the 27th largest country in the world by GDP, it ranks a dismal 43rd for number of internet users, with around 5-million. This number of course doesn’t take into account mobile web useage, which by all accounts is booming, surpassing the desktop web some time ago.

Not the largest African country either
South Africans are used to hearing how their country is the “powerhouse of Africa”. Yes it’s by far the largest economy with well-developed infrastructure which played a large part in securing the 2010 World Cup. But in the internet connectivity stakes the country has fallen behind Nigeria, Morocco and Egypt. Kenya is also fast shooting up the leaderboard. In the late 1990s, the country was ranked 11th in the world for internet useage, but failed to capitalise on the early growth and enthusiasm.

So what’s being done about it
Well lots actually. And it really depends on whether you are the impatient type that needs it all to happen now, or someone who takes a long view. Whether traditional mediums like it or not, the internet on mobile phone and desktop web will become the dominant medium. There is no argument about that. There is however plenty of argument however around the timing of this. Socio-economic factors aside, here are some initiatives that give us hope for growth:

1. Seacom Cable: Due to come online this year, connecting South Africa and East Coast of Africa to Europe. Cheap broadband of up 10X cheaper is expected.

2. Neotel: It’s the relatively new competitor to the dominant telco, Telkom — which has a virtual monopoly, keeping telco prices high and services thin on the ground. Speculation that Neotel would bring down prices hasn’t really materialised, possibly because Neotel, as a new entrant, doesn’t want a price war and probably enjoys the revenue. However I wouldn’t bet on things staying this way as Neotel moves out of startup phase.

3. Altech court ruling: Was a court case that ruled that other players, besides the big boys, could provide internet and communication services on the back of their own networks (bypassing, in part, more expensive, established networks). It’s a step in the right direction, although these new businesses and the necessary infrastructure needed will not happen overnight.

4. Creation of the South African National Broadband Forum formed to work with the new, freshly elected government (after April elections this year) to articulate and fast-track a country-wide broadband strategy at the highest levels. The APC-led initiative aims to bring together various interest groups on March 24 to identify “key components of a national broadband strategy which will be consolidated into a framework to be presented to the new government”.

The South African internet billionaire and Afronaught (first African in space) is mentioned as part of this initiative via the Shuttleworth foundation. What I particularly like about it is that it recognises the importance of the internet as a self-publishing tool in the age of blogging, podcasting, social-networking and content sharing as a democratising force in society. Couldn’t agree more.

10 Responses to “The internet in South Africa: A tale of woe and hope”
  1. The secom cable will not cut costs, it will only improve speeds to european countries. The internet in this country is way too expensive and slow for my liking because of thieves stealing underground and open air cables and the wireless service being so slow, messy and range-less. SOUTH AFRICA NEEDS A INTERNET BOOST!!

  2. There are a couple of other initiatives that need watching. One is the impact of the EASSY cable and the other is Google’s O3B proposal for low orbiting satellites connecting to cellphone towers in developing countries. The benefit of the Google strategy is to roll out high speed internet through mobile telecoms (which bypasses the problems of fixed line which is outpaced by mobile by a ratio of 7:1). I am still doubtful whether we may get the decrease in PRICE needed to drive the broadband internet.
    Call me a pessimist but I remember the same stories doing the rounds with our three network operators to no avail.
    I am also concerned that noone has raised the issue that SEACOM will only connect to major metros and not to smaller (non-viable towns or cities) without major investment in infrastructural costs. For example, Seacom’s high speed broadband will be available in PE and Cape Town, but noone is looking to finance a linking cable from PE to Alicedale or Grahamstown.

  3. @Kevin — yeah hear you on the spelling mistakes. I’m an impatient blogger and type in a rush. The spelling mistakes disappear usually on the 2nd or 3rd draft. If you catch me on the 1st, u’ll find a few!!

  4. @easy e — I try not “summarise old articles” when I write, but keep it original as possible. Where there are old articles, you’ll see links to them.

    I don’t think the comparisons are ludicrous. I think we all know the internet penetration issue, and we are aware of the populations of those respective countries. What I personally find interesting is that many are not aware that we have similar sized online markets to some developed countries from a user-numbers point of view.

    That was my point, amongst a few others.

  5. Its basically a summary of old articles…probably relevant for those outside the industry that are not following. Your stats always interest me as they are taken out of context.

    Saying we are bigger then NZ, Belgium, etc. is ludicrous – I mean their populations are TINY!!!! So whats the point in saying we are bigger with our 5 million UB’s when they dont even have 5 million people?? If you advertise online in Belgium and NZ, you reach the whole market, unlike here.

  6. I can’t believe the Sudan is only 1 percent behind SA. That really brings home how far behind we are given our circumstances (open economy, good infrastructure, stable democracy, etc.)

  7. Great post… we do seem to hear the same old stuff over and over. On MyADSL, there’s like an article a day about the SEACOM cable – and the damn thing’s not here yet!

    P.S. Your post would be even better without the nagging spelling mistakes 😉

  8. Good summary of the issues (why broadband matters) but there is more going on than you mention. Most large cities have some kind of municipally backed broadband infrastructure project, to create fibre infrastructure or networks for carriers to use on an open access basis. There are variations on this model (Johannesburg for example has contracted to whole lot to Erickson) but others (e.g. Durban) have independent networks that are managed by others. Cape Town is building a open access network infrastructure that will be carrier neutral; one carrier will be contracted to create a network based on the infrastructure to serve the municipal administration’s own needs, and the remaining capacity is being used for connecting local universities and research institutions and for use by anyone with an ECNS license.

    A private sector company called Dark Fibre Africa have adopted the same approach; they are installing fibre conduits and unlit optic cable in a number of cities including Johannesburg and Cape Town for lease on a ‘fibre pair per metre per month’ basis. The result will be vastly more fibre in the ground at the local level. Together with the Seacom cable and others (see Steve Song’s ‘many possibilities’ blog for a full list and map, these initiatives will all help to bring more people online.

    There is long way to go to get back on the top of the internet penetration pile, but let’s not be too despondent?

  9. Fantastic post.
    You summarised and crystalised everything we knew (and didn’t know) about the state of Digital in South Africa – Thanks!

  10. Thank you so much! I had some questions thrown at me yesterday about the state of our internet economy and now I have some answers! Two thumbs up.

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