Telecommunications in South Africa: Expanding Horizons

Originally appeared on Wide Angle (PBS) website, “Road to Riches” episode, 2003

Building the Networks of Privilege

Though telecommunications systems in Africa are generally less extensive and sophisticated than those in the developed world, South Africa’s telecommunications networks are among the best in all of Africa. The reasons behind this distinction, like so many other facets of its social and economic landscapes, can be traced back to the effects of apartheid on South Africa’s development.

South Africa’s telecommunications networks were built and maintained by the state-run Department of Posts and Telecommunications. Under the authority of this government agency, and therefore subject to the principles of racial discrimination, South Africa’s telecommunications infrastructure was constructed primarily to serve its white population. Telegraph systems, and later telephone lines, were concentrated around areas where commercial activity took place, such as in mining operations near Johannesburg, and inside South Africa’s urban centers. These were areas that were controlled and dominated by whites. In contrast, communications networks were not extended into rural areas where the majority of South Africa’s blacks lived. During the 1980s, telephone service was estimated to be less than one tenth as common in black regions as it was in white areas.

But sustaining the prerogatives of prejudice was an expensive endeavor. As part of its state-subsidized model of progress, the South African government pursued a cumbersome policy of manufacturing much of its own telecommunications equipment. Such isolationist strategies may have helped South Africa shield itself from the impacts of international sanctions, but they also involved the risks that the nation’s technological development would be costly and that its telecommunications infrastructure could become outdated. During the late 1970s and early 1980s, South Africa’s telecommunications industry incurred heavy debt from the process of digitizing its networks.

As support for the politics of apartheid began to wane, South Africa’s telecommunications industry began a series of striking changes. The Department of Posts and Telecommunications would soon be split in two, and South Africa’s new telecommunications entity would be released from direct ministerial control.

Entering the Global Marketplace

In October of 1991, Telkom South Africa was formed out of the ashes of the Department of Posts and Telecommunications. Telkom controlled the domestic market and the government was its sole shareholder, but it was to be run essentially like a private company, and over the next decade it would become an emblem of South Africa’s entry into the global marketplace.

The inequities built into South Africa’s communications networks made the reassessment of the telecommunications industry an important issue to the African National Congress government under Nelson Mandela. The democratization of South Africa’s telecommunications networks was seen by many to be an important step in raising the living standards of the people of South Africa. Government initiatives such as the New Partnership for Africa’s Development (NEPAD) directly linked access to communication technologies, such as a telephone or the Internet, to expanded economic and educational opportunities. In order to spur development in rural areas, the Telecoms Act of 1996 granted Telkom a continued monopoly of South Africa’s fixed-line telecommunications market in return for an agreement that the company would create 2.8 million new lines with an emphasis on connecting previously underdeveloped areas.

Since then, South Africa has made considerable steps in restructuring its telecommunications industry. After he was elected president in 1999, Thabo Mbeki ushered in a more economically conservative administration and new views on how best to encourage business development in South Africa. In a bold move toward privatization, on March 4, 2003, 30 percent of the South African government’s shares of Telkom were listed for sale on the New York and Johannesburg stock exchanges. The Telkom offering also reaffirmed the South African government’s commitment to black economic empowerment: “historically disadvantaged” South Africans were eligible to buy Telkom shares at a 20 percent discount.

Even more recently, the South African government has stepped up efforts to deregulate its telecommunications industry by establishing a second network operator and ending Telkom’s monopoly. In some parts of South Africa, monthly telephone service can cost as much as an average worker’s monthly wage. Many economists believe that increased competition will lower prices and make telephone service more accessible to poor South Africans. Proponents of deregulation also cite the success of South Africa’s cellular phone market, which has thrived over recent years despite the addition of new players in the industry. According to Cellular Online, 13 million South Africans were using mobile phones in 2002 and estimates indicate that this number could grow to 21 million users by 2006.

However, important political organizations such as the powerful union consortium COSATU have taken issue with President Mbeki’s moves to deregulate the industry. These critics point out that a free market would encourage new businesses to focus on the more profitable urban and cellular markets and ignore the need to develop South Africa’s telecommunications infrastructure in rural areas.

In many ways, the struggles of South Africa’s telecommunications industry are representative of the issues currently facing the nation as a whole. As South Africa moves into its second decade of democracy, correcting the inequalities left behind by apartheid, improving the living standards of its poor, and becoming a part of the global marketplace will all be critical to South Africa’s continued renaissance.