DAVID MONYAE: SA must embrace digital economy

The digital economy is the next frontier of global economic growth, and every country should be positioning itself to benefit from it. The World Bank estimates that the digital economy has grown nearly two-and-a-half times faster than the global economy over the past 15 years and now represents about 15.5% of global GDP.

Some of the biggest digital tech companies, such as Amazon, Alphabet, Tencent and Alibaba, dominate the list of the world’s top 10 most valuable companies. The digital economy reportedly accounts for over 38% of China’s GDP, the second biggest in the world after the US.

The McKinsey Global Institute has forecast that artificial intelligence (AI) will contribute an enormous $13-trillion to the global economy by 2030. Global digital trade is also on the rise. In 2020 digitally deliverable services made up 64% of the total services exports in the world.

In a 2021 report, the World Bank asserted that the harnessing of digital technology could lead to positive development outcomes in various areas, including food security, public safety, education, health and environmental management.

In the 21st century countries’ economic competitiveness is largely determined by the level of their digital economy. As such, investment in digital infrastructure is crucial to the future of economic growth and development.   

Widely accessible digital infrastructure is the foundation of a vibrant digital economy. Hence the widespread deployment of digital infrastructure has been at the centre of SA’s digital transformation strategy. This is articulated in the National Development Plan (NDP), which seeks to create a connected information society by 2030, underpinned by a universally available and seamless information infrastructure that meets the needs of citizens, the public sector and business.

Government’s main priority, as articulated in the NDP, is to grow the information and communication technology (ICT) sector through, among others, attracting investment, restructuring the market, establishing a common carrier network, promoting open access policies, building effective institutions and stimulating demand for ICT products.

Framed as an operationalisation of the vision set out in the NDP, the 2013 SA Broadband Policy also prioritised the deployment of broadband technology with a view to achieving universal coverage in the country. It specifically states as its vision that “by 2020, 100% of South Africans will have access to broadband services at 2.5% or less of the population’s average monthly income”.  

The emphasis on the importance of digital infrastructure for SA was also expressed in the 2020 report of the Presidential Commission on the Fourth Industrial Revolution, which asserted that “the drive to connect people and businesses to the internet with digital infrastructure is urgent and imperative if SA is to prepare for 4IR adequately”.

The development of digital infrastructure at an adequate scale is also one of the priorities of the 2021 Draft National Data & Cloud Policy. The draft document states that “universal access and service are critical to digital transformation. Without universal, secure electronic communication networks and mobile communication networks and connectivity, many of the promised benefits of digital transformation may not be realised. The development of digital infrastructure has been one of government’s priorities since the attainment of democracy.”

Government’s policy of expanding digital infrastructure has enjoyed relative success. Through private investments and state-driven programmes the country has laid over 155,000km of fibreoptic cable, which connects more than 1.6-million homes and buildings to the internet. There is almost universal access to 3G and 4G networks. As a result, the internet penetration rate is reasonably high, with about 64% of the country’s population connected to the internet. This is well above Africa’s average of 40%. SA also hosts a third of the 80 data centres located in Africa.  

While SA has registered decent progress in developing its digital economy, it still lags behind other parts if the world. According to the 2023 Worldwide Broadband Speed League report SA ranks 105 out of 220 countries and territories in terms of average broadband speed, at 36mbs, lower than the global average of 46.79mbs. For perspective, while it takes almost 19 minutes to download a 5Gb file in SA, it takes less than five minutes in countries such as France, Netherlands and the US.

In the 2022 Network Readiness Index (NRI) which measures the state of digital technology, its impact on economies and access to digital technology, among other things, SA was ranked 68th out of 131 countries. However, the country ranked 72 in the adoption of digital technology by the population and 105 in terms of the effect of technology on its economy and society. This shows that SA is yet to fully exploit its potential in the digital economy.

Further, in the 2023 Digital Competitiveness Ranking by the International Institute for Management Development (IMD), SA ranked 58th out of 63 countries. If these rankings are anything to go by, SA will have to make serious improvements if it is to take advantage of the booming global digital economy. 

The government should redouble its efforts in the development and deployment of digital infrastructure. It needs to promote the expansion of the optical fibre network, especially fibre-to-the-home and fibre-to-the-business, which has many advantages over digital subscriber line (DSL) cables. Fibreoptic cables are almost 20 times faster than the DSL cables, which are made of copper.

The speed of data transmission with fibre optics enables the production of high-quality digital content and the use of multiple devices. Moreover, fibre cables are more resilient as they are less prone to the disruptions and faults that affect copper cables, and their operation does not consume much energy.

The fibre cable network can be the backbone of SA’s digital economy by enabling the rollout and functioning of technologies such as cloud computing, AI, 5G and smart cities. These technologies are vital for the efficient provision of digital services in sectors such as e-commerce, health delivery, education and public safety.

More companies are investing in the optical fibre networks in SA. However, coverage is still low compared to countries such as Singapore and the UK. As such, government must create a conducive environment to attract more investment in fibre optics network if it is to grow SA’s digital economy.    

• Monyae is director of the Centre for Africa-China Studies at the University of Johannesburg.