Technology & telecommunications crucial in fostering private business

Elmo Hildebrand Technology Leader, PwC South Africa April 17, 2023

Estimated reading time: 4 minutes

Technology and telecommunications are crucial in fostering private businesses and entrepreneurship in South Africa.

Man working on hiss cellphone.

PwC’s Europe, the Middle East and Africa (EMEA) Private Business Attractiveness Index provides an overview of the relative attractiveness of South Africa compared to 32 EMEA jurisdictions as locations to foster private businesses and entrepreneurship. The attractiveness rankings are based on scores obtained across 51 metrics within eight different categories:

  • Macroeconomics

  • Private business landscape

  • Tax and regulatory environment

  • Environmental, social and governance (ESG)

  • Public health

  • Education, skills and talent

  • Technology infrastructure

  • Start-up ecosystem.

In this year’s report, South Africa’s total index score increased by 8.5 points, moving South Africa up into the ‘developing’ category (from ‘emerging’ in the previous report). Some of the notable strengths are the relatively low tax regime (indirect tax at 15%), the low average days to obtain an operating license, South Africa’s ability to keep inflation relatively low, the high spend on education and one of the largest working age populations.

 

Five telecommunication towers under a night sky.

Technology and telecommunications infrastructure is a key enabler for private businesses in the digital era

In the technology infrastructure category, countries are evaluated based on access to cell phones and broadband internet, the prevalence of mobile connectivity, cyber security, and supply chain resilience. These are important enablers of economic growth, which is supported by research showing a clear correlation between access to the internet for instance, and the Gross domestic product (GDP) growth of a country. Safe access to the internet improves worker productivity, drives process efficiencies, and delivery of higher quality outputs. On the demand side, technology enables improved access to information about products and services, which drives up demand. This example of simple market economics shows how critical technology is for businesses in the digital era.

In this year’s report, South Africa ranks first for cell phone access (i.e. total number of mobile cellular telephone subscriptions expressed per 100 inhabitants) which underpins a relatively good score in the technology infrastructure category, but ranks below all other developing jurisdictions with a ranking of thirty-first in the mobile connectivity rating. The latter is a composite metric derived from Global System for Mobile Communications Association (GSMA) data, which covers the availability of high-performance mobile internet coverage, the availability of mobile services at an affordable price point, citizens' awareness and readiness to adopt these new technologies and online security. 

Affordability challenges limit the effectiveness of a strong technology and telecommunications infrastructure

The dichotomy shown by these two data points highlights the fact that many South Africans are not yet fully integrated and actively participating in the digital economy, which is a drag on our GDP growth. The high cellular telephone penetration in South Africa is encouraging, especially if one considers the good quality coverage of third generation of connective/network technology (3G) / Long-Term Evolution (LTE) services. 

However, the challenge of handset (especially smartphone) affordability means that most mobile users will not benefit optimally from accessing digital services via their mobile devices. According to PwC’s Africa Entertainment and Media Outlook 2022-2026, non-smartphones still constituted 17% of mobile phone ownership in South Africa in 2021. By 2026 however, smartphone ownership will have grown to 97% of mobile phones. The outlook is therefore good for most citizens to have access to the digital economy soon, provided that the affordability of data can be improved.

As further spectrum is released in South Africa, it is expected that data costs will drop. High data prices and low adoption of mobile internet services are a deterrent to the inclusion of people in the digital economy.

 

Man on his phone.

Continued power cuts hamper the progress made by the technology and telecommunications industries

Continued power outages negatively impact the quality of digital connectivity which is hampering businesses’ ability to engage with their customers. 

While the impact has not yet filtered through this year’s index, it impacts our country’s attractiveness in the short term. It affects all businesses and can only be addressed by decisive intervention.

 

Improving consumers’ inclusion in the digital economy will lead to attractive opportunities for private businesses in South Africa

On the positive side, the Government recently released an additional spectrum which will drive down mobile connectivity prices, while several initiatives are underway to further reduce the price of smartphones in South Africa.

If these initiatives are successfully executed and the impact of ongoing power cuts are managed in the short to medium term, we expect a higher number of South Africans to become active consumers of digital products and services, and South Africa’s ranking in the mobile connectivity rating to improve, which will lead to a further improvement in our overall ranking over time. 

Contact us

Elmo Hildebrand

Elmo Hildebrand

Technology Leader, PwC South Africa

Tel: +27 (0) 11 797 4000

Duncan Adriaans

Duncan Adriaans

Partner | Africa Private Business Leader, PwC South Africa

Tel: +27 (0) 21 815 3099

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