Government blocks millions from getting fast and affordable Internet access

Government institutions implementing black economic empowerment (BEE) policies and competition rules prevent millions of South Africans from getting fast, affordable broadband.

Two examples of how the government’s destructive interference in the free market prevents progress are Elon Musk’s Starlink service and Vumatel’s Vuma Key project.

Starlink is a low-latency, broadband internet system developed by SpaceX which uses a constellation of low Earth orbit satellites.

The service is available on all seven continents, in over 60 countries, and currently connects over 2 million active customers.

It is perfect for providing fast, affordable, uncapped broadband to rural areas where fibre is unavailable, like farms, game reserves, and small towns.

The service is available in numerous African countries, including Zambia, Nigeria, Kenya, Mozambique, Rwanda, and Malawi.

However, Starlink, based in the United States, is unavailable in South Africa as it does not abide by the country’s BEE rules.

The country’s rules require telecommunications licensees to be 30% owned by historically disadvantaged groups.

DA MP Natasha Mazzone said the government was using the legislation to try and force SpaceX to give 30% of its equity to “ANC-connected individuals”.

She said these rules deny South Africans the opportunity to fully participate in the digital era, ultimately affecting the most economically vulnerable communities.

The DA has demanded that the communications minister revise relevant legislation to enable international investors to offer high-speed Internet access to all.

MyBroadband tested Starlink in numerous rural locations in South Africa, which shows it works exceptionally well.

However, because of ideological policies which only benefit the political elite, South Africans are blocked from benefitting from this exceptional service.

In turn, Vumatel’s Vuma Key project is suffering at the hands of the Competition Commission, which aims to block a transaction that could significantly accelerate fibre access in poor areas.

Vuma Key plans to offer fast and affordable uncapped fibre services to townships nationwide. It has launched successful pilot projects in Alexandra and Mitchell’s Plain.

Rolling out fibre is capital intensive, which is why Vumatel parent Maziv signed a deal with Vodacom in November 2021 to become a minority shareholder in the company.

Through a combination of assets of R4.2 billion and cash of at least R6.0 billion, Vodacom will acquire up to 40% of Maziv.

The deal has many benefits, including accelerating the fibre rollout in townships and making Vodacom’s fibre assets open access.

Vodacom’s money will strengthen Maziv’s balance sheet and give it the breathing room to pump money into further fibre rollouts.

However, the Competition Commission has dragged its feet since November 2021, preventing any progress with the Vodacom and Maziv plans.

In August, nearly two years after the deal was first announced, the Competition Commission recommended that the Competition Tribunal block the deal.

The good news is that Maziv-owner Remgro and Vodacom remain committed to the transaction and are ready to fight to make it happen.

Remgro’s head of strategic investments, Pieter Uys, said if the deal with Vodacom does not go through, it will impact their ability to connect all South African homes with fibre.

“We firmly believe that the transaction will deliver significant benefits to South African consumers and the broader economy,” he said.

“It will take us ten years to do on our own,” he said. With Vodacom’s investment, they could reduce that timeframe to three years.

Therefore, the Competition Commission’s recommendation to the Competition Tribunal to prohibit the proposed transaction can cause tremendous damage to poor South Africans.

South Africa’s Competition Tribunal has set 20 May 2024 as the date for the final hearing regarding a proposed transaction.