Monopolies choke SA IT companies

GROWTH in the information and communications technology (ICT) sector in SA is being stunted by regulations that benefit existing monopolies, said Datatec Limited chief executive Jens Montanana.

Datatec this week completed plans to list on London’s Alternative Investment Market (AIM), raising $25.8-million towards its plans to expand outside South Africa. The move makes the firm’s shares fully tradeable in both London and Johannesburg.

“Penetration [into SA] could be considerable in 2007 if proper liberalisation is allowed to occur. If the second national operator [Neotel] and other ICT players can genuinely shift the cost of telecoms in a deregulated market, then it will create a significant catalyst for GDP growth. I don’t see that happening yet,” said Montanana.

Liberalisation in the ICT industry was taking a long time because government believes “national champions need to be protected”, said Montanana.

He said it baffled him why a resource-rich country like SA had to pay significantly more for communications infrastructure than less developed countries.

“There is a direct correlation between falling communication costs, broader access and growth in GDP.”

Montanana said it was uncompetitive for foreign companies to set up call centres in SA because of the exorbitant cost of broadband.

He said if the telecoms sector were more diversified, with multiple players offering competitive prices, Datatec would have been more active in SA — as it is in other markets. Datatec has operations in more than 20 countries and 95% of the group’s revenue is generated in the US and UK.

Another senior player in SA’s ICT sector, Dimension Data, faces similar problems. Its chief technology officer for Africa, Alpheus Mangale, said one of the key drivers of the sector in 2007 would be convergence.

He said customers were looking at reducing their costs, as opposed to having different networks providing different services such as voice and data.

He said business users wanted to connect to office functions “on any application using any device through any media” — but providers were not able to provide such services. Users in Europe were enjoying such benefits while SA lagged behind.

Mangale said the slow pace of deregulation of the market prevented new entrants bringing in new technologies.

“Deregulation is an enabler for service providers to enter the market, but it’s not going at a pace everybody expected.

“Some service providers have applied for WiMAX access and we are still waiting for Icasa to legislate on the issue,” said Mangale.

He said difficulties in obtaining spectrum for new wireless technologies such as WiMAX meant average users “would continue to be ripped off”.

Connectivity costs more than 1000 times as much in SA as in Europe and the US because consumers do not have a wide range of services to choose from.

Human capital is another component of an efficient ICT market that government needs to address. Mangale said IT and telecoms networks are of limited use in markets where users lack basic ICT knowledge.

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Monopolies choke SA IT companies