The cost of mobile data is high because regulation does not support competition, the World Bank stated in its latest economic update for South Africa.
While the organisation found that South Africa has been successful in competition enforcement, it said this is lacking when it comes to telecommunications.
Telecommunications accounts for 2.6% of all inputs to industry and 1.7% of South Africa’s exports, the report said.
Of the 5 key players in South Africa’s wireless broadband market, 2 (Vodacom and MTN) account for a 70% market share.
“When firms compete, they offer lower prices and higher-quality products to win market share. Firms are also encouraged to innovate, and become more efficient and productive,” stated the report.
Citing a study from Research ICT Africa, the World Bank said South Africa had the fourth most expensive mobile data in 17 African countries.
With average download speeds of 4.5Mbps, South Africa is ranked at 119 globally for average speed.
“Evidence from other countries shows that improving broadband penetration has potential to boost growth by 1.4%,” said the World Bank.
Better competition for faster growth
Promoting domestic competition between firms can spur faster growth and alleviate poverty in an environment of slow growth and limited fiscal space, the World Bank stated.
As with all emerging markets, South Africa faces challenges from weaker commodity prices, lower Chinese demand, and rising U.S. interest rates.
These difficult circumstances are further compounded by domestic factors, including policy uncertainty, infrastructure gaps, and drought.
The report also notes that rising public debt and prospective inflationary pressures have placed fiscal and monetary policy under pressure.
South Africa is projected to remain largely below the average growth rate of 4.5% for Sub-Saharan Africa in 2016–2017.
The forecast for real gross domestic product growth is at 0.8% in 2016, down from 1.3% 2015. This is the lowest rate of growth since 2009. Growth is forecast at 1.1% in 2017.
“In this prevailing weak economic climate, it is important for South Africa to look to other avenues outside the fiscal space to stimulate faster growth.”
“With this study, we offer evidence for one such route, competition policy, and hope this will enhance debate and reinforce the case for the bold policy decisions needed to revive the country’s economy for faster growth, more jobs, and poverty eradication.”
The World Bank provided the infographic below to summarise its findings.