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The writer says that in South Africa in 1991 there was no telecoms industry to speak of, except for Telkom, which was a landed monopoly and national asset, and Altech, which supplied the equipment Telkom needed and offered it technical advice. Photo: Simphiwe Mbokazi
The separation of telecoms and postal services from the Department of Communications to form a new department and ministry was timely, but also appropriate professional advice to President Jacob Zuma. And his decision to implement was not only politically correct but also economically justifiable.
This is in response to an article published in Business Report on June 12 by Rabelani Dagada, a development economist based at the Wits Business School, titled “Cabinet reshuffle ignores the ethos of technological convergence”.
The article, which is primarily politically motivated with academic sugar-coating, cannot go without a response from us, the scores of professionals who served, and still serve, the ministers of communications, responsible for accepting the decisions we make in our work and recommend to the president. Whether in the past or now, the process remains the same.
I was the chief director of information and communications technology (ICT) policy research at the Department of Communications under the guidance of visionary director-general Andile Ngcaba and Struggle stalwart minster Ivy Matsepe-Cassaburri. I had a hand in almost all the decisions referred to by Dagada at the ministry then. I was convener of the e-commerce green paper consultations and participated in all the deliberations on the convergence paper. Both were enacted into law.
The one step forward, two steps backwards analogy, which the writer uses to conclude that the separation of the telecoms and broadcasting services into different departments was an act of ignorance of the convergence ethos is analytically flawed because it does not embrace the basic principles of policymaking in a dynamic socio-economic environment, which the ANC government inherited from the apartheid architects. The economy, which was aimed at serving about 5 million white people, was in negative growth territory for years. Suddenly, the ANC government, like a messiah, faced the challenge not only of growing the economy, but leveraging all available resources to cater for nearly 40 million South Africans, who included about 32 million black people, to achieve a better life for all.
With a glance at the history of the ICT sector, one would realise that when Ngcaba was appointed to head the ANC’s ICT desk in 1991, there was no industry to speak of, except for Telkom, which was a landed monopoly and national asset, and Altech, which supplied the equipment Telkom needed and offered it technical advice.
Telkom’s top honchos bragged about its estimated value of R25 billion, until the day I threatened that, were it not for the fact that Telkom was a national asset, I would offer to buy it with the lunch-box money I had on me – and still expect tidy change in return. Only then did they come to their senses. This year Telkom’s profit was a staggering R1.5 billion and operating revenue a whopping R32bn.
It is a fact that the ANC not only created the current ICT industry from scratch, but built the market based on international best practice, while closely observing the vested national interest of protecting information as a key resource in a developmental state.
Hundreds of licences were issued to emerging service providers in the telecoms sector, besides the commonly known cases of Vodacom, MTN, Cell C and Neotel, whose creation was not an accident of history, but a conscious decision to create an ICT industry as the future engine of economic growth, which it is today. Among other developments, licences were issued to value-added network service providers (VANs) and least cost routers (LCRs) to compete directly against Telkom, with the option of laying cases of monopolistic behaviour with two independent institutions staffed by specialists and highly qualified professionals: the Independent Communications Authority of SA (Icasa) and Competition Commission.
Not only that, if competing companies still feel aggrieved, they have an option of taking decisions by these two institutions on review to any of the courts in the country, including the highest court in the land, the Constitutional Court. Most of the VANs and LCRs, who respect the laws of this country, including the Broad-based Black Economic Empowerment Act, remain in business to this day. One example is the gritty and innovative provider, Vox Telecom, which is based in Gauteng.
Again, Dagada, a development economist who sounds every inch like a model C school graduate, disregards the two all-important applicable basic principles of economic development pioneered by late Austrian economist Joseph Schumpeter. These are, first, the radical shift in economic patterns known as paradigm change which means there comes a time in the economic history of nations when old industries become obsolete or irrelevant as new ones emerge and assume dominance.
The second principle of Schumpeter’s economic development that the writer disregarded is that of “creative destruction”, which is the chaotic destruction of economic value created by companies within an industry that has reached a certain level of growth or maturity, at which continuing with the business practice or model becomes unprofitable. It is that phase in the economy when growth reaches a certain “critical mass” at which the industry in question “implodes”, or as it is sometimes put, the bubble bursts, necessitating radical changes to the business models of companies to survive the turmoil.
This implosion occurred a number of years ago in the US’s Silicon Valley, when scores of information technology start-ups, launched by self-confident, highly talented nerds, went bust overnight.
It is obvious to all in the ICT industry that South Africa has reached the “creative destruction” growth phase of the economy. This reality was driven home by the commonly known fact that the voice telephony market has reached saturation level, with an estimated 130 cellphone sim cards in issue for every 100 users. At this stage, it becomes unprofitable for any company to attract more clients onto its network who use the sim cards primarily for voice calls, an act which will destroy whatever value it has created over the past years.
At the same time, a technological revolution was under way, giving rise to the phenomenon known as convergence. Several dynamic computer applications were being launched into the market making it easy to stream voice, data and graphics together through one device and receive these either using a laptop or cellphone. This phenomenon, known as multimedia, was further spurred on by the fact that two popular gadgets, the laptop and cellphone, were technically combining into the palmtop, which is even more popular with scores of trendsetters in South Africa.
Given the above scenario, the professionals at the doctor advised the president to separate telecoms and postal services from broadcasting because they both required intensive care treatment. They have demonstrated serious technophobic tendencies, while they are both information-centric companies which should seek to dominate the e-commerce market.
Fortunately Telkom, which has always been lucky to attract highly talented and skilled chief executives, such as Sizwe Nxasana, seems to have returned to the black after the recently appointed chief executive Sipho Maseko stemmed the bleeding. His next challenge is to remove the rot within and create value for shareholders and stakeholders, who include the employees. He has an able ally in chairman Jabu Mabuza, a serial entrepreneur, who will offer support when corporate battles break out over data and/or content later.
The new ministry will dirty its hands with the SA Post Office, with its moribund culture. The key challenges are, among others, a glaring skills deficit at management level and a lack of leadership at the top. On the other hand, at the SABC, the minister should be well advised to appoint a chief with the ability to deal effectively with the stakeholders, who are always contesting for free publicity – even at the expense of flouting established processes and channels.
As a matter of record, Icasa has not complained of lack of independence or shortage of finances through the channels provided by the legislation that established it. The institution does report to the communications portfolio committee in Parliament on a regular basis regarding the review of its mandate. Its mandate is to report to the minister and advise her or him on matters pertaining to the regulation of the ICT sector. I have no doubt that Icasa has the resources and professional capacity to handle the changes with ease.
I agree that Yunus Carrim was efficient at the department. He is not unique. But that is the hallmark of most of the ANC’s political appointees, with a few exceptions.
Zuma had good reason to reshuffle his cabinet, in particular the ministers at the Department of Communications, given the dynamism of the ICT sector and the central role it plays in driving the country’s economic growth. In making such decisions, the president consults several committees within the ANC.
* Mojalefa Moseki is an independent policy analyst.