One government project is 14 years late and crushed an industry and entire companies

South Africa’s failed migration from analogue to digital television broadcasting has devastated an electronics manufacturing sector it promised to support and contributed to the downfall of Ellies.

While government officials often cite the ITU’s 2015 deadline for digital TV migration, South Africa’s original target was actually nearly fourteen years ago, in November 2011.

South Africa aimed to have 80% digital TV signal coverage in time for the 2010 FIFA World Cup, which kicked off on 11 June that year. Total analogue switch-off would then have followed on 1 November 2011.

Government missed both of these deadlines. Since then, constant delays have plagued the digital terrestrial television (DTT) migration, costing the country dearly.

Besides robbing South Africans of better quality terrestrial TV viewing, it also held back the release of new wireless network capacity in the form of spectrum for a decade.

Called the “digital dividend”, Vodacom, MTN, Telkom, and Cell C previously said they could have used this spectrum to improve network coverage and drive down data prices.

Some of this spectrum was released through compromises and workarounds, which allowed the state to raise billions in additional revenue, but only after years of opportunity had already been lost.

What’s even more disappointing is that South Africa’s original digital broadcasting migration deadlines weren’t particularly ambitious.

South Africa had been gearing up to migrate from its old PAL-based analogue terrestrial TV system to a DTT standard for ten years before the 2011 deadline.

In 2001, former communications minister Ivy Matsepe-Casaburri appointed a Digital Broadcasting Advisory Board. By 2002, the board had recommended that South Africa switch to the European DVB-T standard.

On 8 September 2008, the late Matsepe-Casaburri published the Broadcasting Digital Migration Policy. Although it was over a year late, she still assured the country was on track to meet the FIFA World Cup deadline.

Set-top box shambles

Before South Africa could proceed with the analogue switch-off, the last major task was producing and distributing decoder-like devices called set-top boxes (STBs).

These STBs would enable people without satellite TV to watch the new digital TV signal on their existing television sets. Government promised that indigent households would get subsidised, locally made STBs.

Electronics manufacturers would no doubt have been excited by the prospect that government needed millions of DTT STBs in two years to meet its 2011 migration deadline.

However, the cracks started to show in February 2010, when Icasa warned that the analogue switch-off might be delayed to April 2013.

Then, in April 2010, the Department of Communications upended all the work done since 2001 to appease the Brazilian government.

Brazil lobbied South Africa to switch to the Japanese standard it had adopted, ISDB-T, hoping to expand its DTT ecosystem and license its middleware to South Africa.

Logic eventually prevailed, and the late Minister Roy Padayachie announced at the start of 2011 that South Africa would not use ISDB-T, but a newer version of the European standard called DVB-T2.

Everything seemed back on track, but for one major red flag — government’s dithering over standards had given it an excuse to extend the analogue switch-off deadline from November 2011 to December 2013.

This set off a chain reaction of delays and missed deadlines. It also ignited an acrimonious feud between MultiChoice and eMedia over whether South Africa’s digital TV decoders should include encryption technology.

E-tv owner eMedia argued that, without signal encryption, South Africa’s government-subsidised STBs would simply be scalped in other countries that adopted the DVB-T2 standard.

MultiChoice argued that eMedia’s concerns were overblown and could be mitigated in other ways. It also said that putting encryption features in government-subsidised STBs would needlessly increase their cost.

Both these arguments were smokescreens. E-tv saw an opportunity for a government-funded entry into pay-TV, which MultiChoice wanted to prevent as it had spent substantial sums on DStv decoder subsidies over the years.

Signal encryption is essential if you want to offer a pay-TV service, and MultiChoice felt it was unfair that E-tv would not have to fund the development and distribution of its own pay-TV decoder.

The death of Ellies

The court battles between eMedia, MultiChoice, and the government, which were triggered by government ineptitude, further delayed the contracts for locally-manufactured DTT STBs.

This directly impacted listed companies like Ellies and Altron, as well as the three entities appointed to produce and distribute government-subsidised STBs:  CZ Electronics, BUA Africa and Leratadima Marketing Solutions.

Between 2010 and 2013, Ellies was a firm favourite among investors, and there was excitement about its role in providing set-top boxes in partnership with Altech UEC, a former division of Altron.

However, as the government fumbled the DTT roll-out, so did the interest in Ellies and its prospects.

The share price declined by 80% between 2013 and 2014, and the company continued to lose value as it searched for new revenue streams.

A few years later, DStv’s subscriber numbers stagnated and declined in South Africa, causing that part of Ellies’ business to suffer. By 2019, it was trading at 10c per share.

Ellies attempted to quickly pivot into alternative energy solutions like inverters, battery storage solutions, and generators. However, it failed to execute its turnaround strategy effectively.

By January 2024, Ellies was placed in business rescue. However, there was no hope of saving the company, and its brand and intellectual property were ultimately sold to SMD Technologies.

The listed entity, Ellies Holdings, went into voluntary liquidation, while its operating unit, Ellies Electronic, remains in business rescue.

Altron offloads Altech UEC

Similarly, Altech UEC became a drag on its parent company as government failed to settle the dispute between MultiChoice and eMedia and clear a path for the digital TV migration to continue.

After former communications minister Roy Padayachie settled the standards dispute in 2011, Altron UEC launched a 13,500 square meter set-top box factory in Mount Edgecombe near Durban.

With Padayachie in attendance, Altech UEC announced that the factory could produce more than three million television set-top boxes per year.

It forecast that there would be demand for more than nine million as South Africa migrates to DTT, with a further 30 million needed in Sub-Saharan Africa.

However, these numbers never realised, and following the failed launch of the Altech Node satellite push video-on-demand service in September 2015, Altron put Altech UEC up for sale.

Altron sold Altech UEC to Skyblu Technologies in 2019, with the Competition Commission approving the transaction with conditions.