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Implications of Vodacom’s Massive Internet Connectivity Investment for other Sectors

Sep 2, 2019
Implications of Vodacom’s Massive Internet Connectivity Investment for other Sectors

East London - As it stands, South Africa’s internet penetration is still relatively low, clocking in with 32.6 million users within the 58 million population, marking a penetration of 56.2 per cent as of mid-2019.

This puts South Africa behind Cabo Verde, Kenya, Liberia, Libya, Mali, Mauritius, Morocco, Nigeria, Senegal, Seychelles, Tanzania, and Tunisia according to the findings of Internet World Stats.

On 15 August, it was officially announced by the Vodacom Group that they would be spending 9.6 billion rand to enhance the mobile networks in rural areas of its home market, as reported by Reuters.

The South African mobile phone operator wants to accelerate the coverage provided in rural areas to modernise digital services and base stations across the country.

As it stands, Vodacom’s 3G network is available to 97 per cent of the rural South African population, with 4G available to 75 per cent of the rural population. Such hefty investment goes much further than simply giving more people faster access to the internet: it will have many implications for other sectors as well, particularly those who offer their goods and services online.

Greater accessibility to benefit online vendors

One sector that stands to gain a great deal from the enhanced internet accessibility across South Africa is that of e-commerce, and particularly services like online gaming and online retail. The more increased online penetration is in the country, the wider range of digital payment systems (as well as trust in those systems) is expected.

Entertainment will be among the primary online sectors to receive a boost, with people gaining access to gaming websites like South African casino Karamba, with the increased accessibility making online play much more viable across the country.

Out of the payment options available at the latter, Skrill, Neteller and PayPal are traditionally thought of as "online" payment methods, while VISA is used in both the online and offline world and paysafecard bridges the two worlds, by having consumers buy prepaid cards in person to use online in order to pay for services or even goods.  

As it stands, revenue in the South African e-commerce market amounts to US$3.3 million, with US$1 million of that coming from the electronics and media segment, according to Statista. As is the case across many developing countries, e-commerce revenue is expected to continue to show annual growth, with South Africa’s predicted annual growth rate from 2019 to 2023 expected to be around 9.9 per cent.

The hefty investment in internet connectivity by Vodacom will be contributing factor to this growth. Despite e-commerce revenue being dominated by electronics and media in South Africa, internet users will have to make use of a far more important online service if the nation’s e-commerce market is to reach its predicted goals.

Digital payment methods will become even more important as accessibility improves and more e-commerce services come into the South African market.

How South Africans pay for online goods

While e-commerce is a developing, multi-million US-dollar industry in South Africa already, the preferred payment methods are currently not as modern as you may assume. According to the data compiled by eShop World, the digital payment service PayPal only gets a 14 per cent preference as the payment method for online shoppers in Nigeria and South Africa, with 54 per cent of South Africans who shop online preferring to pay in cash on delivery.

Of the digital payment methods available, it may be those used for payments in-store which stand to gain the biggest boost from increased internet accessibility, with mobile wallet technology on the rise. Africa ranks second among the world’s continents when it comes to the use of mobile payment methods, and yet South Africa currently is currently lagging behind the likes of Kenya.

That said, South Africa is certainly on the rise in this facet, boasting a massive 15.1 per cent growth rate in non-cash transaction volumes, which is primarily down to the adoption of mobile payments and governmental efforts to increase financial inclusion, per the World Payments Report.

More and more South Africans are adopting mobile payment services across the country for many different products and services, and as many of these providers also offer their services as e-wallet payment facilitators in e-commerce, we should see a boost in the nation for digital payment methods once more people have better access to the internet.

There is, however, a stumbling point in the praise for Vodacom’s attempts to increase accessibility to rural South Africa: the prices. The company boasts that its mobile internet networks are available to the vast majority of the rural population, which may be true, but it’s no good to anyone if they can’t afford the service.

As noted by Research ICT Africa, a lack of internet-enabled devices and the perception that the internet is unaffordable are among the primary inhibitors of people, informal businesses, and informal businesses getting online. Even though mobile phone penetration is very high, at 93 per cent, among small business and informal business owners, less than one-fifth of them use their mobile phones for the management or processes within their business.

Only two years ago, it was found that South African companies are charging the highest data prices to their customers among all other big African economies.

Modernising digital services and base stations could do wonders for people living in the rural areas of South Africa as well as the sectors that they would interact with in e-commerce, but until the services and devices become more affordable, the investment will mean very little to those not currently on the mobile network.

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