Impact of ICT Industry on South African Economy: Input from Industry Players

Chairperson: Mr M Lekgoro (ANC)

Documents handed out
None

SUMMARY
Various Information and Communications Technology (ICT) organisations were invited to speak about the objectives of their organisations, their training and skills development programmes, their efforts to ensure Black Economic Empowerment to bridge the digital divide with regard to race and gender. The Universal Service Agency promotes universal and affordable provision of telecommunications services, the South African Communications Forum promotes the participation of previously disadvantaged individuals in the ICT, broadcasting and electronics sector and the Black Information Technology Forum works to propel black people into the mainstream of the ICT sector and improve access for disadvantaged communities to Information Technology

The Information Technology Association outlined its objectives, efforts to enhance the lives of ordinary citizens, the migration from an ordinary citizen to an economically integrated citizen, the need to transcend rhetoric to action, plans to bridge the digital divide, issues surrounding access to telecommunication services and who would benefit from the technological growth in the Information and Communications Technology (ICT) sector.

The Communications Users of South Africa Association submission outlined its background and underlying principles, the need for non-discriminatory access to telecommunications networks and facilities to reach both underserved and unserved areas, the need to broaden the reach of ICTs and to use them as economic enablers and methods of growth and upliftment, the need for value added networks services (VANS) and Internet Service Providers (ISPs) to lay down their own infrastructure and the fact that the current legislation prevented convergence because there are sets of different rules, most of which are becoming outdated by technological advances in different aspects of the industry.

The Computer Society of South Africa (CSSA) submission dealt with the organisation’s underlying principles, ICT related education and training programmes, its professional development and advancement initiatives, efforts in community development, the need for transformation of the ICT sector, representation at government level and the CSSAs recommendations on whether the ICT industry truly enhances the lives of ordinary citizens.

The Internet Service Providers’ Association focused on whether the rapid growth of technology in the ICT sector benefited the majority of South Africans

VANS SMME Awareness Campaign stated that the VANS SMME sector had trouble with the current definition of a VANS provider and that regulations must not be based solely on abstract legal analysis but should rather take into account the real world implications of such decisions. It also suggested that the current definition of ‘services’ was problematic, that Internet Service Providers (ISP) should also be unregulated, the purpose of licensing SMME VANS must be questioned, the definition of infrastructure and services in the Convergence Bill were becoming distinguishable, regulators must ensure that the entities providing services were protected from unfair competition by the network providers, the importance of the Internet in South Africa and the need to mend the SMME digital divide.
 

During discussion, members raised concerns about delays in connecting rural schools to the internet, bridging the digital divide, high bandwidth prices that make it impossible for the call centre industry to expand and create jobs. There was a dire shortage of landline penetration due to lack of infrastructure. ICT captains of industry had taken initiatives to combat offensive internet content and some companies had translated their software to more languages other than English. Challenges facing the industry were the need to increase the capacity of the regulatory body to cope with the changing telecommunications industry, and finalising the policy on number portability.

MINUTES
Universal Service Agency
Mr Chose Choeu, Chairperson of Universal Service Agency, noted that Information Technology should enhance and benefit the majority of South Africans. The first objective of the Telecommunications Act was to promote universal and affordable provision of telecommunications services. The Act had led to the creation of the Universal Service Agency. USA had recently subsidised Karabo Communications, Bokone Telecommunications, Thinta Telecommunications, Kingdom Communications to the tune of R15 million spread over a three year period. The subsidies would enable the consortia to roll out infrastructure in under-serviced areas and allow BEE companies to bid for the licences. The Department, ICASA and the USA had been on a road show to provinces with under-serviced areas in order to encourage awareness.

The Act also stipulated the encouragement of a competitive and diverse telecommunications industry through the liberalisation of the telecommunications market in South Africa. In addition, the needs of people with disabilities had to be taken into account in the provision of telecommunication services. The USA would be setting up 21 centres at the nodal points to provide services which would be accessible to people with disabilities. The Act also provides for the participation of women and Black Economic Empowerment. Lastly the Act emphasised the development of human resources to address the skills shortage. The Telkom Centre for Learning has done a lot in training employees who were faced with retrenchment.

South African Communications Forum
Ms Malerato Mnguni reported that SACF was a Section 21 Company that had strived to promote the participation of previously disadvantaged communities and individuals in the ICT, broadcasting and electronics sector. The organisation was comprised of Platinum, Corporate, SMME and individual members countrywide. There were 133 700 employees in the IT sector. The broadcasting industry employed 54 000 people. The distribution in terms of gender and race was Africans 18.7% and African women 7.8 % and 0% Disabled Africans. Coloured men were 7.8%, 4.5% Coloured Women and 0% Disabled. Indians were 5.6% men, 2.4% females and 0.2 disabled. White men were 35.%, 17.8% Women and 0.2% disabled. The mission of the organisation was to enhance economic development of historically disadvantaged communities nationally and throughout the continent. The study demonstrated that there was still a lot of work that had to be done in bridging the digital divide across race and gender.

The Forum had developed programmes such as training, development, outreach and advocacy and was involved in policy research and intervention. The SACF had successfully lobbied for a 5% stake in Vodacom in 1993. The forum had participated in the process leading to the adoption of the Telecommunications Act of 1996 and the Telecommunications Amendment Act 2001, Electronic Communication and Transaction Act of 2004. The Forum was actively involved in the Convergence Bill. The SACF had played a leading role in the formulation of the ICT Empowerment Charter. On education and training, the forum had launched the T.W. Khambule Education Trust. The aim of the Trust Fund was to identify achievers who could be trained in ICT. So far two candidates had been trained and placed with employers. Approximately 200 candidates had been trained in telecommunication studies. Those candidates were thereafter placed with the telecom players who had won tenders to serve under-serviced areas. The studies included policy because of the highly regulated nature of the industry.

The SACF had established 40 learnership programmes for training in Telecommunications and Information Technology. The interns were placed with municipalities and 50% had been retained by the municipalities. On Outreach and Advocacy programmes, the Forum had assisted the licencees by commissioning research on the commercial viability of rural telecommunications. The results of the study would give them a basis for how they would operate.

Black Information Technology Forum
Mr N Naidoo, Chairperson of the Black Information Technology Forum, presented to the Committee a brief overview of his organisation. The BITF was launched in the Western Cape in 1995 and established its national footprint in 1997. The mission of BITF was to propel black people into the mainstream of the ICT sector and improve access for disadvantaged communities to Information Technology. The BITF was involved in influencing policy making forums. The Forum had been involved in two programmes: the ABC programme and foundation to solicit the sourcing of skills within the sector and engage corporate entities to offer internships. The ABC programme was formed in response to the demise of black ICT companies in South Africa due to lack of access to working capital, the lack of management depth in black IT professional and lack of sustainable revenue. The BITF also held seats on the Information Systems Electronic and Telecom Technologies Sectoral Education and Training Authority (ISETT SETA) and had played a key role in drawing up the ICT Charter. The Forum was one of the key drivers in facilitating the growth of SMMEs within the sector. Key challenges facing the Forum were to ensure sustainability of the projects. The Forum had been involved with Gauteng Online project aimed at connecting schools in that province, the Khanya Project and the Smart Cape Access Project in the Western Cape. The objective of the Smart Cape Access Project was to provide access to ICT through libraries for underprivileged children.

Information Technology Association
Mr Mthunzi Mdwaba, Chairperson, stated that the objective of the ITA included the promotion of consistent standards of professionalism and standards in the industry, the promotion and upholding of the ITA code of ethics, encouraging co-operation between members and dealing with all such matters as may affect members’ common interest from time to time, promotion and support of any legislative measures affecting the interests of members, conferring with national and local government, affiliating with any association as may be decided upon from time to time, to collect and disseminate information likely to be of use to members and to encourage and assist in the settlement of disputes between members and their employees.

The ITA has three seats on the ISETT SETA and it has played a key role over the last 3 years. The ITA has developed a healthy working relationship with the Computer Society of South Africa, the Electronics Industry Federation (EIF), Women in ICT (WICT), the SMME Forum and the Black Information Technology Forum. The ITA played a large role in the ICT Charter, and it funded 70% of the monies used to fund the ICT Charter.

Enhancing the lives of ordinary citizens
This can only be addressed via broad based black economic empowerment, which includes all the elements of the empowerment scorecard and the ICT Charter. The ICT Charter was central in improving the lives of ordinary South African citizens. An emphasis must be placed on corporate and individual skills in terms of the relevant legislation, as skills development cannot be separated from corporate development.

Migration from an ordinary citizen to an economically integrated citizen

The provision of software was very important and innovation and creativity as a country as also very important, and was lacking at the moment. Employment and entrepreneurship, together with learnerships were important. Change management has to be stressed as a failure to change the mindset of current management systems was the biggest weakness. The major problem here was that, although it was good for people to look towards finding employment, they did not consider going into business for themselves.

Transcending rhetoric to action
SMMEs, particularly black owned, play an important role here, as well as skills and preferential procurement and enterprise development. The extent to which black women, communities, disabled persons, workers, co-operatives and the youth participate meaningfully in all areas of the sector must be increased.

Bridging the digital divide
This was very important.

Access issues
The ICT Charter focuses on facilitating access to ICT by the rural poor as well as other marginalised groupings. Skills needed to be provided to rural citizens in the far flung areas to increase access. The identification and alignment of initiatives with national priority programmes, particularly the E-government strategy, was key. The ITA played a role in the supporting of the provision of affordable and universal access to ICT infrastructure services via the Universal Services Agency (USA) and other similar initiatives. Villages must be connected with ICTs in establishing community access points, as provided in the ICT Charter. The connection of universities, colleges, primary and secondary schools must also be provided throughout the country, as this was not provided in the rural areas at all.

Beneficiaries of the technological growth in ICT
The sustainability of ICT initiatives must be ensured. ICT impacts differently on different levels. Extremely slow progress has been made and largely business was affected and very few people were benefiting at this stage, but there were a few successes. The South African government needs to incentivise software development and intellectual property capacity, and must invest in research and development as included in the ICT Charter.

Communications Users of South Africa Association
Mr Mike van den Bergh, Chairperson, stated that CUASA was formed in 2001 to represent the interests of all communication users and communication providers, across all sectors of the South African economy, and also includes licenced service providers, Value Added Networks (VANS) and Internet Service Providers (ISP) as well. CUASA actively supports liberalisation of the telecommunications sector, to ensure greater choice for consumers and all users of telecommunications services. The CUASA objective included to promote users interests and to ensure that the voice of the user is always clearly heard when communications issues are being decided, to confer with all tiers of government, to collect and diseminate all information likely to be of use to members and to represent South African users in the international arena.

CUASA’s key underlying principles include maximum freedom of choice, which was the most desirable route to follow in terms of actually achieving the very important goals of reduced tariffs, improved service, greater renovation etc. These were the key route to economic enablers and raising the quality of life of all South African citizens.

CUASA subscribes very strongly to the need for non-discriminatory access to telecommunications networks and facilities. The new ministerial determinations allow opportunities for SMMEs and entrepreneurs to step in and make a difference without having to be told from time to time what in fact they can and cannot do with the telecommunications facilities available. This has to increase the range and number of telecommunica+tion services available. CUASA engaged in industry-type reviews, particularly the Telkom rate regime, with the Independent Communications Authority of South Africa (ICASA) which CUASA believes lead to the downward pressure on the rates.

Continuous attempts are made to grow African representativity, and was involved in all the major international fora. CUASA was focused on liberalisation, universal access, broadband, voice over internet protocol (VOIP), internet telephony and numbering.

Domestic front
One of the key needs was to constructively and cost-effectively reach bother underserved and unserved areas of the community, to broaden the reach of ICTs and to use them as economic enablers and methods of growth and upliftment. High tariffs are a huge disincentive and, on a comparative basis, South Africa is still a very long way away from international standards. One of the most important lessons to be learnt from international experience was to lower tariffs, which in fact generates massive growth. The Indian situation was a good example, where services were provided to customers at approximately R30-35 per customer. Unfortunately this was virtually unheard of in South Africa.

The fact of the matter is that competition brings out positive change. Liberalisation of the telecommunication sector was key to growth and effective competition, and the Ministerial directives published last September and which became effective today was a very welcomed step in the right direction. It created the opportunity for users to enjoy a greater choice of service provider which leads to lower tariffs and improved services. One such new service was VOIP

One of the matters that did not change unfortunately was the opportunity for value added networks services (VANS) and Internet Service Providers (ISPs) to lay down their own infrastructure. This did however remove one of the key underpinnings of a competitive environment, which is choice of infrastructure. The underpinnings of the industry and the structure as a whole must be changed to really reap the benefits of true competition and its impact on lower cost. The restriction on infrastructure provision does mean that there are now limitations on the opportunities to reach underserviced areas using technology such as wireless and satellite technology.

Everyone subscribes to universal service but often encounters challenges in delivering. All licencees have an obligation to contribute towards the achievement of universal service, and creative means have to be employed to achieve the gains needed. ICTs can also be used to create jobs and infrastructure.

The current legislation acts as a barrier to convergence because there are sets of different rules, most of which are becoming outdated by technological advances in different aspects of the industry. The legislation must be updated and brought under one umbrella.

Computer Society of South Africa
Ms Moira de Roche, President, stated the CSSA has approximately 2600 members most of whom were individual people working in the IT industry and is affiliated to the International Federation of Information Processes (IFIP). CSSA is the second oldest computer society in the world. Far more black members were joining CSSA, which is indicative of transformation in the sector. The CSSA’s five focus areas were: ICT related education and training, professional development and advancement, community development, transformation and representation of the ICT practitioners at government level.

ICT related education and training
This was promoted at school level to ensure that matriculants were ready to participate in the IT sector. The CSSA assisted in devising curricula as well as accreditation at tertiary level, and its youth portfolio was aimed at under 25’s.

Professional development and advancement
This focused on the ongoing development of people who were already in the industry, and held seminars that were aimed at keeping people’s knowledge levels up to date. Efforts were also being made to elevate people in the industry from entry level positions to the next stages, because the concern is that the market would become flooded with entry level positions.

Community development
The CSSA sought every possible opportunity to advantage previously disadvantaged communities, and its members were more than willing to participate in community development projects. The focus falls at project level and the CSSA provides mentoring.

Transformation of the ICT sector
The CSSA was actively involved with the ICT Charter and would really like to encourage industry to conform to the Charter. A unit within the CSSA provided entry level skills in IT to persons, as well as provision of career guidance to ensure that learners have an opportunity to really understand what the industry is about.

Representation at government level
The CSSA lobbies government on industry concerns, makes submissions on legislation impact the industry, generates position papers and has representation on various government associated bodies. Efforts were being made to establish a forum of IT societies in the southern African region.

Does ICT enhance the lives of ordinary citizens
ICT is an enabler and should not be considered a driver, and thus the need within society must be identified and technology must then be used to meet that need. This would cerate value for all the e-government initiatives. Focus should be placed on making people understand why technology would improve their lives. Accessibility and sustainability of technology is key, and the technology must be made affordable.

Initiatives should focus more on the demand side rather than on supply, because this could flood the IT market. There were far too many disparate funding initiatives, and a process of pooling resources should be undertaken as this would expedite proceedings. A further concern to CSSA was that there were too many industry bodies, about 40-50 in total in South Africa. One of the greatest concerns was that women were under-represented in the industry.

CSSA recommendations
The CSSA recommends that the industry use the technology it currently has and to devise ways of getting the most out of it. Open source technology must be promoted as it would aid accessibility and is much more affordable. Far more telecommunications liberalisation was needed and open learning centres should be placed in the community by using the resources already available, to ensure access to telecommunication facilities by the communities. The usage base of telecommunication facilities must be constantly increased, and more women must be engaged in ICT initiatives.

Internet Service Providers’ Association
Mr Masedi Molosiwa, Co-Chairperson, stated that ISPA is an association that represents the interests of the providers of Internet connectivity.

Is rapid growth of technology in the ICT sector benefiting the majority of South Africans
The answer quite emphatically is no. Yet this question was flawed because it did not elicit perspectives that allowed people to engage in new solutions and, secondly, this question was not being discussed and thus no workable solutions have been found over the last 10 years. The question thus instead should be how ICT enhances the lives of ordinary citizens and particularly those in rural or far flung areas.

Technology is an enabling tool, as stated earlier by Ms de Roche, and it will not in itself solve all our problems or make life easier if the fundamental objectives are not clearly articulated. Technology must thus be used to assist in the problem that is already in the process of being solved. A perfect example would be the Internet which, if one considers its evolution, was really just the enabler of communication and information sharing. The problem of need must thus first be identified, and then the appropriate technology that would facilitate the achievement of that goal must be deployed. ISPA’s closest intervention in this area has been the provision of training for teachers because educators are change agents who have largely been underestimated in the past.

ISPA was committed to fighting the following primary problems facing the South African economy: poverty alleviation, the fight against HIV/AIDS and job creation. The next step would then be to identify the technologies available to fight these three problems.

The key challenge being grappled with is the review of the regulatory environment in such a way that it allows for affordability of services and telecommunications access. Without policies that actively look at reducing pricing that begins to affect the input costs, the meaningful changes required is unattainable. The current legislative framework limits any innovation that seeks to provide such services to the communities that need it most.

VANS SMME Awareness Campaign
Mr Ron Holloway, Director of the SMME Awareness Campaign, stated that the campaign sought to draw awareness from the SMMEs with regard to the regulatory environment which Value Added Network Services (VANS) find themselves in.

The first problem that the SMME finds itself in is the definition of a VANS provider. The definition was non-existent until the 2001 Amendment to the Telecommunications Act. This issue has been waging for the past 8 years, and to date there remains no certainty as to the precise nature and definition of a VANS. In 1997 a definition of a VANS was proposed and it was included in the 2001 Amendment to the Telecommunication Act, whereas the VANS SMME Awareness Campaign’s definition of a VANS was almost a cut and paste of the United States’ Federal Communications Council (FCC) definition of an ‘enhanced service’. The FFC explicitly created the definition of an ‘enchanted service’ to be as broad as possible, and the Campaign has a problem with the fact that the definition is so broad that a one or two man business offering a service would fall under the same regulatory regime and licencing fees as Telkom or MWEB.

The FCC’s decision to leave that sector unregulated was to further Metcalfe’s Law which stated that the value of the network was proportional to the number of services the network provided. There would thus be a telecommunication network that contained services, which added value to the network. All the network did was facilitate the transmission of content from a service provider to an end user, and thus neither the content itself nor the service was telecommunications. The FCC’s definition made it clear that services were not telecommunication, whereas this was the case under the current South African legislative definition. The Campaign was of the view that it is the flawed South African definition that prevents growth in the SMME sector.

Regulations must not be based solely on abstract legal analysis but should rather take into account the real world implications of such decisions. It was apparent that the regulations being created were of such a legally abstract nature that they did not address the actual technical issues and the practical implications that the regulations would have.

Definition of ‘services’
Services plug into a network, they do not constitute telecommunication. An example would be a fax machine which is not a telecommunication service, as it uses a telecommunication service to transmit a facsimile from one machine to another. Fax machines have now been replaced by computers and computer programmes now provide services which are very similar to what a fax machine would provide. These services deliver content to users via a network, and it is the network that must be regulated as it is the network that is the telecommunication service. The programmes or applications providing the content are not telecommunications. Elsewhere in the world regulators have been very careful to distinguish between networks and services, and they have left services unregulated because this allows the growth of the value of the network.

In the same light Internet Service Providers (ISP) should also be unregulated. In most cases they do not even have a network of their own and were simply reselling access to networks, which was provided for by other companies. The ISP simply facilitated the access to the network.

SMME VANS
Most SMME VANS, As defined under the current Telecommunications Act, do not control the network through which they connect and purchase access to the network through a provider. They physically cannot connect and most SMME VANS are able to host their server anywhere in the world, yet these VANS currently fall under the same ‘all or nothing’ regulatory regime. It was analogous to needing a space shuttle licence to fly a kite, and thus the purpose of licensing these VANS must be questioned.

Convergence Bill
The Convergence Bill indicated that the definition of infrastructure and services were becoming distinguishable. The convergence model consists of the physical dimension, being the actual wiring, spectrum and public switch telecommunication network, then the network providers who were building Internet Provider networks, who created backbone structures. The final link would be the applications or services, who produce the content. The applications or services do not need a network of their own in order to provide a service, they merely needed access to a network. This means that the client of a network provider can provide a service.

There were cases in which network providers also provided services and the regulators must ensure that the entities providing services were protected from unfair competition by the network providers. The Convergence Bill makes provision for individual licences and class licences. The individual licences are noted as infrastructure service licences, which would be the physical wiring and spectrum, while the communication network service licences would be the providers of the Internet Provider networks and the interconnection. The communication application services and communications content services would then fall under class licences.

The class licences were really the driving force behind what would add value to South African networks. They would be able to create employment and innovation and would provide growth to the SMME sector, but the correct regulatory environment was needed.

It was also encouraging that the Convergence Bill stipulates that ICASA may, from time to time, prescribe the type of communications service that may be provided without a licence. However the Convergence Bill did not repeal Section 40 of the Telecommunications Act which defines a "VANS" and it did not provide clarity on the status of a "service provider". The service providers were really the agents that would fill the gap in the digital divide.

Internationally regulators differentiate between network providers or backbone networks, and service and content providers, which they define as value-added services or enhanced services. The service and content providers were almost always left unregulated. There were also comparative studies which indicated that where the service and content providers were left unregulated there were definitely more people connected to the Internet and there was a wider variety of services provided over the Internet.

Regulations must protect service and content providers and the SMME sector from unfair competition from network providers. Mr Holloway stated that he made these recommendations to ICASA, but they indicated in no uncertain terms that fixing the Telecommunications Act was not easily done, but no opportunities would be provided for the SMME industry in South Africa if a sound regulatory environment was not created.

Importance of the Internet in South Africa
The Internet was extremely important in South Africa for the following reasons:
- it was a means of open dialogue for communication between communities even if they are in remote areas;
- it has a part to play in improving governance, and the E-governance initiative by government is a success story;
- it can assist in improving the social well-being of citizens of South Africa by, for instance, allowing people to access health and welfare resources very easily;
- it can reduce poverty by enabling people to have businesses without needing infrastructure such as premises, and can thus run businesses from home and compete on a level playing field with larger companies;
- it creates new economic opportunities through the invention of new services and technologies;
- it can help support indigenous knowledge by documenting the diverse cultures in South Africa.

Mending the SMME digital divide
There were several factors that prevented SMMEs from growing in South Africa, which included the following:

(i) the high cost of bandwidth
Telkom currently provides ADSL access for roughly R800 per month. SMMEs must pay R22 000 for the equivalent service. The pricing structures must be regulated and made more competitive.

(ii) deregulation of last mile access
There were cheap new technologies in place which the SMME sector cannot make use of, but last mile access will make a big difference in bringing access to telecommunications services to rural areas.

(iii) lack of a flat rate pricing regime for Internet access
Comparative studies have shown that countries that provide a flat rate access system have more Internet users.