One thing holding back R91 billion investment in South Africa

To unlock a potential R91 billion worth of investments in South Africa’s tech sector, data prices have to come down to expand access to high-speed internet.

This would enable more South Africans to engage with the country’s existing eCommerce and other digital platforms, encouraging greater investment in the sector. 

Research from Naspers and the Mapungubwe Institute for Strategic Reflection (MISTRA) flagged high data prices as the key reason preventing large investments in South Africa’s tech space. 

South Africa’s most valuable company said it expects eCommerce and other digital platforms to inject R91.4 billion into the local economy over the next decade. 

This means the sector would grow to contribute 1.38% to South Africa’s total GDP and provide thousands of jobs. 

The potential impact includes a cumulative tax contribution of R10.7 billion and the creation of over 341,000 and 157,000 full-time jobs based on monthly earnings of R12,000 and R26,000, respectively.

“Looking ahead, the South African economy stands to gain significantly by fully harnessing untapped digital platform opportunities in sectors like gaming and the informal economy and by expanding platform services to underserved markets,” the report said. 

If South Africa’s economy grows more quickly than it has for the past decade, the R91 billion investment boom could be achieved much earlier. 

This investment has the potential to significantly alter South Africa’s eCommerce landscape. The sector has grown strongly in recent years, but still makes up a small portion of total retail sales. 

Research from World Wide Worx, Peach Payments, and Mastercard South Africa showed that companies generated just over R71 billion in revenue from online sales in 2023. 

Online sales are growing strongly, at around 30% per year over the last decade. But, they still only make up a mere 6.15% of total retail revenue in the country. 

By 2025, this figure is set to rise to over 10% which is a critical threshold but still far behind more developed markets. 

The research from Naspes and MISTRA also identified some of the factors holding South Africa back from this potentially revolutionary investment boom. 

Chief among them was the price of data, which prevented widespread access to high-speed internet across the country and thus prevented many people from participating in the online economy. 

“The average cost of 1GB of mobile data in South Africa is around $1.81 (R33.21), which places the country among the more expensive as compared to other markets like Nigeria, Namibia and Kenya,” the report said.

MyBroadband recently used Cable.co.uk’s mobile data price data to compare the cost of 1GB of data in South Africa to other nations on the African continent.

South Africa’s average price of $1.81 (R33.21) per GB of data compares reasonably well to the African mean of R66.86 per GB. However, countries like Zimbabwe, Saint Helena, and South Sudan significantly push up this average.

Compared to the median price of R23.16 across all African nations, South Africa’s price is more than R10 more expensive per GB on average.

Only 14.5% of South Africans can access the Internet at home or through a fixed-line. However, South Africa’s mobile network coverage means that around 78.6% of residents have access to mobile Internet.

Unfortunately, the high price of mobile data in South Africa makes access to the Internet difficult for many residents.

The report called for the development of private-public partnerships to expand high-speed internet access and digital infrastructure across the country. 

It also said the country needs to improve its energy reliability over the long term and increase the efficiency of its logistics network. 

Another significant hurdle to the growth of South Africa’s technology sector is the lack of skills available for company’s to leverage. 

Science, technology, engineering and maths (STEM) graduates only makeup 18% of the total in South Africa, lagging behind more developed countries in which this figure exceeds 30%.