The internet in South Africa: A tale of woe and hope

The tale of doom and gloom about the uncompetitive South African telecoms market is all too familiar. It’s kept a stranglehold on internet growth in this country, meaning the country has performed way below its potential in this sphere in comparison to the rest of the world.

Arguably we are now moving in the right direction, and we should be headed for a belated boom in broadband connectivity. But it’s all going very slowly. And it’s hard to be anything but sceptical when every year we hear about the “potential” and how its all going to change. I’m sick of myself saying it too. I don’t believe me anymore.

It hit home for me in a big way when we hosted a delegation of chinese bloggers at 24.com. They were interested to know how we made online businesses in an entire market of only 5-million users. A single website over there with 4-million users, isn’t an attractive business they told me. They play in a market of something like 300-million internet users.

So I replied, to sceptical looks, that it’s not just about numbers and but about pricing and positioning — and there are good online businesses here. For example, the country has more internet users than countries such as Austria, Czech Republic. It’s way bigger than the offerings of New Zealand or Ireland (In fact double the size). The local online market is comparable to Switzerland, Belgium or Saudi Arabia. But still, it’s just not good enough and way below potential.

South Africa not the biggest African country
Despite South Africa being the 27th largest country in the world by GDP, it ranks a dismal 43rd for number of internet users, with around 5-million. This number of course doesn’t take into account mobile web useage, which by all accounts is booming, surpassing the desktop web some time ago.

Not the largest African country either
South Africans are used to hearing how their country is the “powerhouse of Africa”. Yes it’s by far the largest economy with well-developed infrastructure which played a large part in securing the 2010 World Cup. But in the internet connectivity stakes the country has fallen behind Nigeria, Morocco and Egypt. Kenya is also fast shooting up the leaderboard. In the late 1990s, the country was ranked 11th in the world for internet useage, but failed to capitalise on the early growth and enthusiasm.

So what’s being done about it
Well lots actually. And it really depends on whether you are the impatient type that needs it all to happen now, or someone who takes a long view. Whether traditional mediums like it or not, the internet on mobile phone and desktop web will become the dominant medium. There is no argument about that. There is however plenty of argument however around the timing of this. Socio-economic factors aside, here are some initiatives that give us hope for growth:

1. Seacom Cable: Due to come online this year, connecting South Africa and East Coast of Africa to Europe. Cheap broadband of up 10X cheaper is expected.

2. Neotel: It’s the relatively new competitor to the dominant telco, Telkom — which has a virtual monopoly, keeping telco prices high and services thin on the ground. Speculation that Neotel would bring down prices hasn’t really materialised, possibly because Neotel, as a new entrant, doesn’t want a price war and probably enjoys the revenue. However I wouldn’t bet on things staying this way as Neotel moves out of startup phase.

3. Altech court ruling: Was a court case that ruled that other players, besides the big boys, could provide internet and communication services on the back of their own networks (bypassing, in part, more expensive, established networks). It’s a step in the right direction, although these new businesses and the necessary infrastructure needed will not happen overnight.

4. Creation of the South African National Broadband Forum formed to work with the new, freshly elected government (after April elections this year) to articulate and fast-track a country-wide broadband strategy at the highest levels. The APC-led initiative aims to bring together various interest groups on March 24 to identify “key components of a national broadband strategy which will be consolidated into a framework to be presented to the new government”.

The South African internet billionaire and Afronaught (first African in space) is mentioned as part of this initiative via the Shuttleworth foundation. What I particularly like about it is that it recognises the importance of the internet as a self-publishing tool in the age of blogging, podcasting, social-networking and content sharing as a democratising force in society. Couldn’t agree more.