Say no to InfraCo
At a press conference in Pretoria last week, the directors-general of the departments of communications and public enterprises, Lyndall Shope-Mafole and Portia Molefe, unveiled a grand plan for the state to spend about R5bn laying a high-capacity submarine cable system across the Atlantic Ocean.
The cable, to be built by new state-owned company InfraCo, will divide into two, with one leg connecting to Brazil, where it will join other high-capacity cables that connect South America and North America, and the other leg providing high-speed connectivity into Europe. Government wants the Brazilian leg to be completed by 2009; it has not set a target date for the European segment.
The Atlantic Ocean project comes on top of another government-led project, under the auspices of the New Partnership for Africa’s Development (Nepad), to build a fibre-optic submarine cable and terrestrial backhaul network along Africa’s east coast.
Nepad had planned to work with the consortium building the East Africa Submarine System (Eassy), another mostly private-sector-led system, but telecom companies and some African countries objected to an attempt by Nepad, led by SA, to wrest control of the system. It is now clear that the SA government has fallen out with the Eassy parties — Shope-Mafole issued a veiled threat at last week’s press conference that government could bar Eassy from landing on SA shores.
The idea is that the proposed Nepad cable, which will link SA and countries in East Africa to cable systems in the Middle East, will connect to the Atlantic Ocean cables along the KwaZulu Natal coastline. It is envisaged that the Nepad cable will also be built by 2009.
At first glance, these look like good projects. Broadband Internet access in SA has remained terribly expensive because one company, Telkom, has enjoyed a monopoly over the Sat-3/Safe cable system that links SA with cable systems in Portugal and Malaysia. If government were to build new systems and lease capacity on them to commercial enterprises at close to cost, it should drive down communications prices.
Shope-Mafole says the investment will be a platform for competition in the sector; that confidence by government will lead to private-sector investment. That’s the theory. In practice, the idea is flawed and could inflict long-lasting damage on SA’s telecom industry.
Here’s the problem: government will chase away foreign investment by building infrastructure and offering access to it at prices with which the private sector can’t hope to compete. So private investors, who are already lining up to spend hundreds of millions of dollars on new cable systems, could be chased away.
Instead, government will invest R5bn of taxpayers’ money building its own systems that compete with private operators. Government justifies this because, it says, the market has failed to deliver. But the market hasn’t been given the chance to prove itself. The reason prices are so high is that government has insisted on protecting Telkom from competition for far too long.
So, instead of doing what is needed — extricating itself from the industry, opening the market to competition and fair practice — government is increasing its involvement in the sector, chasing away foreign investors and threatening to use its legislative powers to ban companies that dare compete with it.
Government has made a hash of opening SA’s telecom sector to competition. InfraCo is not the solution. It should be scrapped before it undermines one of SA’s most dynamic industries.
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