How Zuma’s stupid decisions are making mobile more expensive

The effect of President Jacob Zuma’s decision to reshuffle his cabinet and fire finance minister Pravin Gordhan, and his deputy Mcebisi Jonas, has hurt South African mobile operators.

Speaking to the SABC, Vodacom CEO Shameel Joosub said the cabinet reshuffle, and subsequent rating downgrades and currency weakening, means mobile operators have to pay more to operate.

Joosub said many of their costs are linked to international currencies.

A good example is mobile network equipment, which is paid for in US dollars or other international currencies.

“When the currency weakens by 25% or 30%, what it means in real terms is that we can buy 25% or 30% less,” said Joosub.

Operating costs also increase with a weaker rand, as equipment licences and related costs are based in foreign currencies.

Joosub said a stronger rand is always good news for Vodacom’s local operations.

Ratings downgrade

Joosub said the credit rating downgrades have a direct impact on them, as it makes capital more expensive – which increases their cost base.

The downgrades also mean the banks “tighten up”, which in turn puts pressure on consumer spending.

Joosub said the recent downgrades have impacted Vodacom negatively, and further downgrades should be avoided at all costs.

“If South Africa gets further downgrades, it could be disastrous,” said Joosub.

Now read: Zuma magic – from R12.33 to R13.92 in a week

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How Zuma’s stupid decisions are making mobile more expensive