How COVID-19 exposes the defects in South Africa’s digital economy

With the rapid growth of the digital economy and the globalised nature of economic systems, there is no doubt that the global COVID-19 pandemic has disrupted the complex world economy and will reshape all sectors in the foreseeable future. South Africa is not spared from these disruptions, and the already strained economy will be profoundly impacted as the number of confirmed local infection cases grows, the industry-wide economic disruptions increase, and the constrained economic activity due to contagion mitigation continues.

In the 21st century, it is undeniable that access to high-speed broadband service has the potential to create opportunities that enhance socio-economic development and cultivate innovative, thriving economies. The worldwide spread of the novel coronavirus disease underlines the extent to which countries are interconnected and co-dependent. Despite determined global efforts, collective action and scientific progress made to mitigate COVID-19 infection rates, there is still high uncertainty regarding the virus itself and when the safety measures imposed by various countries to reduce the spread of the virus will be safely relaxed.

As the epicentre of COVID-19, China, despite its controversial action, appears to have curbed the infection rate in Wuhan and other cities. The significant factors that contributed to China’s ability to reduce the infection rates are arguably proactive policies that ensured the provision of free universal healthcare, access to clean water and sanitation and significantly, affordable or free high-speed broadband internet access.

In contrast, the impact of COVID-19 exposes the fact that many South Africans lack, not just access to the internet, but also access to digital devices that would enable them to work remotely and continue with other aspects of their lives via online channels. As South Africans are restricted to working/studying from home, the impact of the novel coronavirus pandemic underlines the importance of information communication technologies (ICT) in South Africa now more than ever.

On March 23rd, President Cyril  Ramaphosa announced a nationwide lockdown to curb the exponential increase of confirmed COVID-19 cases in South Africa. The vast majority of South Africans, bar those working to provide essential services, are restricted to their homes for 21 days. However, due to the uncertainty regarding the end of the pandemic, social distancing measures might be in place for longer than anticipated. The call to “#StayAtHome” will have a disproportionally negative impact on disadvantaged South Africans who are still excluded from the digital vision prescribed by the National Development Plan (NDP). In fact, the aftermath of COVID-19 could intensify the following pre-existing developmental and ICT deficiencies:

Growing digital inequality

Research ICT Africa’s (RIA) 2018 Report on the State of ICT in South Africa reveals that high-speed broadband internet and the broader digital economy play a vital role in South Africa. With internet penetration levels of only 50%, high mobile data prices, expensive smart devices and low-bandwidth connectivity in certain areas, social distancing and self-isolation containment measures are easier said than done.

The privileged few who have highspeed internet access and other resources can leverage digital opportunities that ease the transition to social distancing. For instance, one can avoid potential contamination and crowds at hospitals by arranging a virtual or telephonic consultation with a healthcare provider should one suspect COVID-19 symptoms. With restrictions on non-essential social contact, privileged South Africans can avoid the physical exposure of being in grocery stores by using online shopping as an alternative. Albeit a longer delivery period due to increased demand and unit limitations on some products to prevent stockpiling, the privileged can still safely order their groceries online for delivery at a registered physical home address (which some South Africans still do not have).

Inadequate national ICT policy coherence

The President’s announcement includes a five-week nationwide school closure. To compensate for the disruption in the curriculum, mid-year school holidays will be shortened by a week. According to RIA’s 2017 After Access Survey, education and income are the determinants of internet connectivity and use in South Africa. Although the Department of Basic Education’s Strategy 2015-2020 and Education White Paper 7 indicate that there are policies to facilitate e-learning platforms in South Africa, there has been poor implementation in ensuring that these policy tools leverage the use of ICT to accelerate the achievement of national education goals.

If social distancing restrictions are extended to the next quarter, the pre-existing educational inequalities in South Africa will be exacerbated as vulnerable students will experience months of missed schooling in the public education system. In stark contrast, private schools and some higher education institutions are in the process of accelerating the adoption of remote teaching and cementing e-learning alternatives to the traditional in-class teaching environment. This still disadvantages impoverished university students who rely on campus desktops and internet facilities, as they are unable to afford a compatible smart device of their own. In addition, these students will face immense challenges participating in the online curricula due to poor bandwidth in some areas and lack of affordable data options.

Extended ICT infrastructure delays

SA Connect, the government’s ambitious project to deliver widespread broadband access to 90% of the country’s population by 2020, and 100% by 2030, demonstrates that the government is aware of the importance that nationwide ICT tools and services play in achieving developmental outcomes. To accomplish the SA Connect goals, government needs to ensure extensive fibre roll-outs beyond affluent areas. However, the national broadband plan and strategy have not been implemented. Not even the first round 2016 targets have been met – and with the abandonment of the plan to leverage existing private investment to connect all public buildings with broadband and free public wi-fi, the higher speed 2020 targets continue to be way off.

Long-overdue infrastructure upgrades dependent on Chinese investment or network equipment across the continent may also be impacted by the stringent shutdown witnessed in China to control COVID-19. Component and communications equipment manufacturing companies in Shenzhen and Wuhan are facing traffic restrictions and work resumption delays, which will strain short-term supply.

As the largest producer of optical fibre and cable in the world, China’s slowdown in the production and supply of these essential high-speed broadband components, coupled with the uncertainty around COVID-19, will likely cause a ripple effect that will result in ICT infrastructure project delays across Africa, since the supply of inputs that are used in these projects as well as telecommunications equipment and semiconductors will be affected.

The COVID-19 pandemic is likely to increase digital inequality that exists in our country unless the pandemic acts as an “external shock” to policymakers and regulators. They need to facilitate a more competitive and enabling environment that addresses developmental goals and transforms the South African ICT sector to better facilitate participation in the digital economy. The following scenarios exhibit how the pandemic could potentially transform the South African digital landscape.

Enabling regulatory environment, data price reductions and increased internet access

In anticipation of the strain on networks due to the exponential increase in data usage from the containment measures announced by the President, the Independent Communications Authority of South Africa (ICASA) made a pre-emptive move to consider regulatory concessions that would enable South Africans to better deal with pandemic’s mitigation measures. The interventions include frequency spectrum relief for the duration of the declared state of disaster, relaxation of the tariff notification filing requirements, which will enable operators to perform speedy roll-out of affordable (and/or free) access to data and the use of TV whitespaces spectrum for the roll-out of data services in rural and remote areas.

ICASA’s announcement coincides with announcements by South Africa’s dominant operators, Vodacom and MTN, to reduce data prices by at least 30% and 50% respectively from 1 April. Even though the price reductions are a result of a previous Competition Commission finding, lower data prices will be a welcome relief for consumers, as they grapple with adjusting to social distancing measures.

Increased e-commerce and localised digital innovation

Online shopping is a notable beneficiary of the economic impact of COVID-19, as “well-off” people turn to online retail stores to avoid crowded public spaces. But the RIA access and use survey shows us that a very small proportion of South Africans (10%), and even fewer sub-Saharan Africans, made use of e-commerce services. The impact of the virus highlights the digital opportunities for significant localised innovation in fintech, health, education and the retail sector, which could have longer term systemic effects in enabling local economic multipliers. Also, the pandemic creates a window to establish enabling regulation that does not compromise privacy and cybersecurity rights, which could facilitate the drive to establish widespread use of digital identity and may allow people to sign documents remotely, access telehealthcare services and receive grants through mobile money.

The digitalisation of healthcare

The impact of COVID-19 could firmly place the global healthcare industry in the digital revolution. With the relevant information technology infrastructure in place, the government can create digital records, digital prescriptions and systematically track and analyse extensive patient data, which allows hospitals to reallocate scarce resources and improve diagnostic accuracy. The digitalisation of South Africa’s healthcare system could be a significant long-term response to the COVID-19 pandemic. The foresight to integrate innovative digital solutions that develop online healthcare delivery models, make use of smart health gadgets, facilitate online pharma-retail and doctor to patient telehealth services could be the supplementary relief that boosts the public health system’s ability to deal with social distancing lockdowns and quarantine measures that are enforced for a longer-term and prepare for future pandemics.

Potential reduction in price of smart phones due to lag in sales

Offline channels dominate mobile phone sales, and containment measures mean that fewer consumers are venturing out to brick-and-mortar stores to buy mobile phones and personal devices. Due to shifts in consumer priorities and constrained economic activity during lockdown, consumer behaviour changes are expected to translate to a drop in the purchase of luxury goods such as new smart mobile devices. There is no way to accurately predict whether COVID-19 will affect the mobile phone market in the same way as it’s 2004 predecessor, the SARS virus. However, based on the assumption that there will be similar outcomes, the overall impact of COVID-19 on mobile phone supply, demand and distribution channels means that smartphone sales are expected to decline in the short-term.

The major reason given by South Africans for not being online and amongst other countries surveyed by RIA in 2018-2019 was the price of the smart device. Even entry-level phones are beyond the means of most Africans. States could provide immediate relief by removing all customs and excise duties, which in some country make up as much as 30% of the total cost, on entry level smart devices.

If the novel coronavirus crisis follows the pattern of the SARS outbreak, once a sense of normalcy resumes, the impact of the pandemic will accelerate innovation in 5G, artificial intelligence, augmented reality and other areas to stimulate faster mobile phone demand volumes. This may create short-term positive impacts for South African consumers as prices of “older” models are slashed in the first quarter to increase mobile phone sales volumes. Although Hubei province, which recorded the highest confirmed cases of COVID-19 in China, isn’t a significant base for mobile phone makers, supplier disruptions in Guangzhou could delay phone deliveries as far as the second quarter.

During times of crises, South Africans need to have access to credible real-time information to prepare and pre-empt their actions against the spread of the COVID-19 pandemic. But as shown in RIA’s 2017 After Access Survey, the digital divide in South Africa is exacerbated mainly by high data prices and costly smart devices which make essential communication services unaffordable for the majority of South Africans. Furthermore, the Survey shows that offline education, income and geographic inequalities are perpetuated online. No doubt this is amplified during times of crises when the economic and social value of having both affordable high-speed internet access and adequate digital literacy, has a significant impact on an individual’s health, safety and financial stability.

High-speed internet access is a public resource that is an important feature of modern society and everyone is entitled to access it. The novel coronavirus pandemic highlights the fact that South Africa needs to be better prepared digitally in order to make nationwide high-speed internet access a reality. We need contextually adequate ICT infrastructure roll-outs that address the growing digital inequality, public policies that cater to the complex South African socio-economic landscape, and regulation that encourages an enabling competitive environment, which facilitates equitable spectrum access, lower mobile data and smart device prices, and the delivery of affordable high-speed internet access throughout the country. Lessons learned from the impacts of COVID-19 should be a much-needed wakeup call to spur inclusive and equitable digital transformation of the economy.