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Economic impacts of submarine fiber optic cables and broadband connectivity in South Africa


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The report looks at the economic and job-creation impacts of undersea cables in SA, finding significant increases in GDP per capita from the economic activity catalysed by improved connectivity from the post-2009 flurry of cable landings, along with consequent increases in employment in areas connected to fibre infrastructure. These impacts are significant, and they signal that efforts to tackle affordability challenges are important for addressing inequity and ensuring that the economic benefits of connectivity are enjoyed by all.
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| Page 1Economic Impacts of Submarine Fiber Optic Cables and Broadband Connectivity in South Africa
Economic Impacts of Submarine
Fiber Optic Cables and Broadband
Connectivity in South Africa
November 2020
Prepared by
Alan C. O’Connor
Benjamin Anderson
Charley Lewis
Alice Olive Brower
Sara E. Lawrence
RTI International
3040 E. Cornwallis Road
Research Triangle Park, NC, USA
Working Paper 0214363.202.5
Sponsored by
| Page 2Economic Impacts of Submarine Fiber Optic Cables and Broadband Connectivity in South Africa
Economic Impacts of Submarine Fiber Optic Cables
and Broadband Connectivity in South Africa
Subsea cables are the global backbone of the Internet, connecting people, businesses, and economies around the world.
They connect us to the cloud, deliver streaming video, and increase eciency and productivity for business. Subsea cables
importance is all the more apparent during the Covid19 pandemic when many of us have switched to working from home,
remote learning, and online gaming and entertainment.
We studied the economic impacts from subsea cables that arrived in South Africa in 2009 to understand how they changed
the economy. The results show that the economic impact overall was large, and there were more jobs in ber-connected areas.
However, the economic gains were not broad-based, in part because many South Africans cannot aord service.
© RTI International, 2020
Download the full report at
Alan C. O’Connor, Senior Director, Center for Applied Economics & Strategy |, +1.919.541.8841
Recommended Citation: O’Connor, Alan C., B. Anderson, C. Lewis, A. O. Brower, and S. E. Lawrence. 2020, November. Economic Impacts of Submarine Fiber Optic Cables
and Broadband Connectivity in South Africa. Working Paper 0214363.202.5. Research Triangle Park, NC, USA: RTI International.
cables arrive Economic Impacts
New rms and
startups emerge to
serve consumers
and businesses
Growth in
eciency, and
revenue for rms
Easier transition to
remote work
2.2% increase in likelihood of
one being employed in ber-
connected areas*
increase in GDP per
capita by 2014
Despite these notable impacts, more than
40% of South Africans remain unconnected—
especially people in rural areas, townships, and
informal settlements—largely because they
cannot aord service.
Existing consumers enjoy
better speeds, increasing
their consumption of
digital content, products,
and services.
Increased internet speed,
quality and reliability
makes doing business
Some consumers decide
to subscribe to services
for the rst time
More businesses use the
cloud and e-commerce
for the rst time
Network is
built out
data trac
Internet speed
Price per data
unit decreases
Jobs GDP
Before major subsea
cable arrivals
GDP (Billions of 2011 USD PPP)
GDP (PPP adjusted) in the absence of connectivity
improvements from new subsea cables
GDP impact catalyzed by improved connectivity
from subsea cables
Subsea cables landing in 2009 catalyzed a 6.1% increase in GDP by 2014. This chart presents values at purchasing power parity (PPP), which accounts for changes in living standards over time. Doing so
presents the most accurate picture of the impact that the connectivity improvement from subsea cables makes on people’s lives. At PPP, in 2014 GDP was $659.7 billion instead of $621.8 billion.
For reference, in nominal terms (without any adjustments to measure living standards across time and countries), South Africa’s GDP was $351 billion in 2014.
* Hjort, J, Poulsen, J. 2019. The Arrival of Fast Internet and Employment in Africa. American Economic Review, 109(3): 1032-1079.
| Page 3Economic Impacts of Submarine Fiber Optic Cables and Broadband Connectivity in South Africa
3.1 Econometric Analyses 6
3.1.1 Dierence-in-Dierences (DID) 6
3.1.2 Synthetic Control (SC) 7
3.1.3 Simultaneous Equations Model (SEM) 8
3.2 Thematic Analysis of Interviews with Key Stakeholders 9
4.1 Impacts to Date 10
4.2 Forward-Looking Implications of Econometric Analyses 12
5.1 Market Structure, Competition, and Trends 13
5.2 Network Expansion 15
5.3 Uptake Proposition: Price, Aordability,
Quality of Service, and Content 17
5.4 Public Policy Priorities 18
5.5 Economic Development 19
5.6 Social Empowerment and Inclusion 19
Table of Contents
Recommended Citation: O’Connor, Alan C., B. Anderson, C. Lewis, A. O. Brower, and S. E. Lawrence. 2020, November.
Economic Impacts of Submarine Fiber Optic Cables and Broadband Connectivity in South Africa. Working Paper
0214363.202.5. Research Triangle Park, NC, USA: RTI International.
| Page 4Economic Impacts of Submarine Fiber Optic Cables and Broadband Connectivity in South Africa
1. Overview
This study explores the economic impact of the international
data connectivity delivered by submarine ber optic cables
(“subsea cables”) on South Africa. Subsea cables are the
global backbone of the internet, connecting people, busi-
nesses, and economies around the world (Figure 1).1,2
The importance of connectivity to economic growth is
well-established—and further underscored by our collective
experience during the COVID-19 pandemic—but robust
studies have not been conducted for many countries.3,4
This study is one in a series our team prepared about how
improvements in international data connectivity have
generated economic growth for several countries in Africa.5
We focus on recent cable landings in South Africa, such as
In 2019, two academics, Jonas Hjort and Jonas Poulsen,
studied the impact of subsea cables on employment in South
Africa.6 They quantied that someone is 2.2% more likely to
be employed because of subsea cables if they lived within
500 meters of the ber network.
Our team found that subsea cables’ connectivity led to a 6.1%
increase in GDP per capita between 2009 and 2014, even
after accounting for population characteristics, economic
conditions, and other important factors (Table 1). The produc-
tivity benets are substantial. Like Hjort and Poulsen, we
found employment impacts in close proximity to the ber
infrastructure, but we did not nd any at the national level. It
appears as if job gains are geographically concentrated.
We also looked back over the 16-year period from 2002
through 2017. We found that each 10% increase in South
Africa’s broadband penetration lead to a 0.27% increase in
GDP per capita. Subsea cables play a role here because they
increase data trac and competition, bring down prices,
further broadband uptake, and spur utilization.
South Africa has certainly beneted from cables’ increases in
data connectivity, but it is not clear how broad-based those
gains are. Over 40% of the population does not or cannot get
online. Aordability appears to be a challenge.
This study combines rigorous economic analysis with
perspectives from South African telecommunications
experts. We marry quantitative results with insight into the
trends and developments that characterize how South Africa
has leveraged subsea cable landings to economic benet,
why those benets may not be more broadly distributed, and
steps the country is taking to move forward.
1 Clark, K. 2019. Submarine Telecoms Industry Report, 7th Edition. Submarine Telecoms Forum.
2 Brake, D. 2019. Submarine Cables: Critical Infrastructure for Global Communications. Information and Technology Foundation.
3 Minges, M. 2015. Exploring the Relationship between Broadband and Economic Growth. WDR 2016 Background Paper; World Bank , Washington, DC.
4 Khalil, M., Dongier, P., & Zhen-Wei Qiang, C. 2009. Information and Communications for Development: Extending Reach and Increasing Impact. World Bank.
5 Other countries included in this series are the Democratic Republic of Congo, Kenya, Mozambique, Nigeria, and Tanzania.
6 Hjort, J, Poulsen, J. 2019. The Arrival of Fast Internet and Employment in Africa. American Economic Review, 109(3): 1032-1079.
Table 1. Key Takeaways: The Economic Impact of Subsea Cables on South Africa
a Hjort, J, Poulsen, J. 2019. The Arrival of Fast Internet and Employment in Africa. American Economic Review, 109(3): 1032-1079.
b Authors’ estimates.
Employment growtha2007—2014 2.2% increase in likelihood of one being employed in ber-connected areas
Firm growtha2007—2014 23% increase in net rm entry per quarter
Economic growthb2009—2014 6.1% increase in GDP per capita
Long-term economic growthb
International bandwidth
consumption per user
• Broadband penetration
0.15% increase in GDP per capita for every 10% increase in international bandwidth
consumption per user
0.27% increase in GDP per capita for every 10% increase in broadband penetration
| Page 5Economic Impacts of Submarine Fiber Optic Cables and Broadband Connectivity in South Africa
Figure 1. Role of Subsea Cables in Internet Connectivity
2. Background
South Africa is the continent’s third largest economy, behind
Nigeria and Egypt. While the economy has grown between
1% and 2% per year since 2017, this has been outstripped by
population growth, with income per person having fallen
since 2011 (RSA, 2019). Its gross domestic product (GDP)—
the most common measure of the value of all goods and
services produced by a country—was $351.4 billion in 2019.
GDP per capita was $6,001.
South Africa’s economy has long ceased to be driven by
mining and agriculture. By 2018 it could be described as
largely industrialized, with contributions to GDP dominated
by nance, real estate and business services (22%), govern-
ment services (17%), trade, catering and accommodation
(15%), and manufacturing (14%) (Stats SA, 2019). By contrast,
the more traditional, labor-intensive and lower-skilled sectors
of agriculture, forestry and shing (3%), mining (8%) and
construction (4%) are now small segments. The country’s ICT
sector has struggled to grow in importance, contributing
roughly 3% to GDP, according to Stats SA (Stats SA, 2017). This
is just half of the OECD average of 6% (OECD, 2017).
Large numbers of South Africans are aicted by poverty. In
2015, 19% of the population was below the international
poverty line (Stats SA, 2019). In addition, South Africa’s
wealth is highly unequally distributed, with a mere 10% of
the population holding roughly 71% of the country’s net
wealth in 2015. South Africa thus has an extremely high GINI
Co-ecient of over 0.6 making it one of the most unequal
countries in the world (Oxfam, 2019).
Unemployment, especially among youth and those with-
out tertiary education, is a serious challenge. South Africa’s
ocial unemployment rate continues to hover stubbornly
around 27%, with the expanded unemployment rate (which
includes those no longer looking for work) consistently
some 10% higher, currently at 39%. There is also consider-
able regional variation in these gures, with unemployment
standing at 37% in the Eastern Cape region, compared to 22%
in the neighboring Western Cape.
Infrastructure investments and policy
decisions aect the extent to which
countries are able to benet from
Once international bandwidth lands
from the sea, data moves through
terrestrial networks and points of
presence to reach a rm or household.Subsea cables are part of a
complex internet delivery system.
International bandwidth
via submarine cable
Landing station Points of presence
Fixed line to the
rm or household
Mobile network
Terrestrial Fiber
| Page 6Economic Impacts of Submarine Fiber Optic Cables and Broadband Connectivity in South Africa
Table 2. Key Indicators for South Africa’s Population and Economy
Population 58.6 million people 2019
Literacy Rate 87% of population aged 15+ 2017
Primary education completing rate 82% of population aged 25+ 2015
Poverty rate 19 % of population below World Bank poverty line of 1.90 USD PPP/day 2014
GDP, nominal USD Total
• Per capita
$351.4 billion
6,001 2019
GDP, nominal rand • Total
• Per capita
5.1 trillion
86,711 2019
GDP, purchasing power parity • Total
• Per capita
680.8 billion (2011 USD PPP)
12,004 (2011 USD PPP) 2017
Unemployment 27% of labor force 2018
Gini Coecient 63 2014
Another way to look at South Africa’s GDP is to take into
consideration purchasing power parity (PPP). PPP accounts
for diering price levels for comparable expenditure catego-
ries between countries. By applying PPP one can assess, both
between countries and over time, real year-on-year changes
and economic trends based on actual living standards.
Through the lens of PPP, South Africa’s economy is the
equivalent of $681 billion (2011 USD) with a per capita GDP
of $12,004. Later, we will use the PPP method of quantifying
the South African economy to generate our results, enabling
impacts to be interpreted directly as improvements in living
standards relative to dierent points in the past.
South Africa’s rst subsea cable—an analog aair, oering
360 channels—landed in 1967 at Melkbosstrand, north of
Cape Town. It was followed in 1993 by SAT-2, which oered
565 Mbps. Both have since been decommissioned, in 1993
and 2013 respectively. Since 2009, a number of new several
subsea cables have landed bringing high rates of interna-
tional bandwidth to the country (Table 3). South Africa’s
subsea connectivity in the context of the continent as a
whole can be seen in Figure 2.
Table 3. International Subsea Cable Landings for South Africa
Source: Telegeography’s Submarine Cable Map and STF Analytics’ Submarine Cable Almanac.
7 Construction commenced at the Duynefontein landing station in 2017, and MTN expects the cable to go live in 2020.
Sources: Penn World Table and The World Bank.
SAT-3 / WASC 12.8 Melkbosstrand 2002
SAFE 12.8 Melkbosstrand & Mtunzini 2002
SEACOM 28.8 Mtzunzini 2009
Eastern Africa Submarine Cable
System (EASSy) 15.36 Mtzunzini 2010
West African Cable System (WACS) 54 Yzerfontein 2012
Africa Coast to Europe (ACE) 55 Duynefontein 20207
2 Africa (announced) 180 Melkbosstrand 2023
Equiano (announced) 100 Melkbosstrand 2021
| Page 7Economic Impacts of Submarine Fiber Optic Cables and Broadband Connectivity in South Africa
Figure 2. African Undersea Cables
Song, S. 2020. African Undersea Cables (2023). See https//
3. Analysis Approach
Our study paired rigorous econometric (statistical) analysis
methods with interviews with 10 executives and market
analysts in the South African internet ecosystem. Through
this approach not only were we able to acquire insights into
what the data tell us, but we were also able to identify import-
ant barriers and facilitators to South Africa’s ability to derive
further economic development value from subsea cables.
Note: Because terrestrial ber and wireless networks connect
users to subsea cables’ landing stations, we include them in
the analysis. However, we emphasize that the impacts quan-
tied are for the international connectivity associated with
subsea cables and not domestic connectivity. Increasingly,
nationally hosted internet exchanges, local content delivery
networks, and data centers are bringing data resources on
shore. Despite this trend, for many emerging economies like
South Africa international connectivity is critical.
Three complementary econometric methods quantied the
impacts of subsea cable landings: dierence-in-dierences,
synthetic control, and simultaneous equations model. Of
all available methods, these oer the most robust, reliable,
and accurate way to estimate causal eects in the context
of subsea cables. Each derives from cutting-edge statistical
techniques8,9,10 and have been used to investigate research
questions similar to those posed by our analysis.11,12,13
3.1.1 Difference-in-Differences (DID)
DID estimates the causal impact of subsea cables on employ-
ment and rm-level outcomes. We review DID here, having
replicated analysis results rst published by Hjort and
Poulsen (2019).
DID consists of identifying the impacts associated with a
specic intervention or treatment over some period of time.
In this analysis, international data connectivity via subsea
cables is the intervention. The impact (“treatment eect”) is
identied by comparing the dierence in outcomes before
and after the intervention for the group exposed to the
intervention (“the treatment group”) to the same dierence
for the unexposed (“the control group”). Being assigned to
the treatment group is based on close proximity to terrestrial
ber in the base period. Being located near terrestrial ber is
a key factor that would enable individuals/rms to access the
benets of subsea cables. Because DID estimation is based on
the dierences in the changes that occurred between the two
groups pre- and post-subsea cables, the technique inherently
controls for many time-invariant factors such as age and
gender. See Figure 3.
The data on individuals used for analysis of employment
came from the Statistics South Africa’s Quarterly Labour Force
8 Athey, S., Imbens, G. W. 2017. The State of Applied Econometrics: Causality and Policy Evaluation. Journal of Economic Perspectives, 31(2): 3-32.
9 Baum-Snow, N, Ferreira, F. 2017. Causal Inference in Urban and Regional Economics. National Bureau of Economic Research (NBER) Working Paper Series. Working Paper 20535.
10 Imbens, G. W., & Wooldridge, J. M. 2009. Recent developments in the econometrics of program evaluation. Journal of Economic Literature, 47(1), 5-86.
11 Hjort, J, Poulsen, J. 2019. The Arrival of Fast Internet and Employment in Africa. American Economic Review, 109(3): 1032-1079.
12 Abadie, A., Diamond, A., Hainmueller, J. 2010. Synthetic control methods for comparative case studies: Estimating the eect of California’s tobacco control program. Journal of
the American Statistical Association, 105.490 (2010): 493-505.
13 Roller, L.H., Waverman, L. Telecommunications infrastructure and economic development: A simultaneous approach. American Economic Review, 91.4 (2001): 909-923.
14 We use the baseline terrestrial ber to assign treatment to avoid upward biasing the estimates. Note that the expansion of terrestrial ber between baseline and endline only
makes the estimates more conservative.
15 Quarterly Labour Force Survey, Statistics South Africa,
| Page 8Economic Impacts of Submarine Fiber Optic Cables and Broadband Connectivity in South Africa
Survey (QLFS),15 which asks individuals about their employ-
ment status and type of occupation. The data for analysis of
rm outcomes came from the South Africa Companies and
Intellectual Property Commission’s administrative dataset
of rm registrations.16 The QLFS data are geocoded and the
CIPC data contain companies’ postal codes, which enabled
precision in the econometric approach.
Using the QLFS and CIPC data, Hjort & Poulsen (2019) were
able to compare changes in employment outcomes and rm
registrations (before and after subsea cables) for individuals
and rms, respectively, located within a few hundred meters
of the terrestrial ber to the same changes for individuals and
rms located just beyond this distance but still located within
a few kilometers of the ber.
Excluding individuals and rms located farther than a few
kilometers from terrestrial ber and focusing on changes
between groups located just on either side of a narrow
margin produces a control group with high comparability
to the treatment group. The resulting groups are similar in
terms of both demographic and geographic characteristics,
and they would arguably be subject to the same shocks (i.e.
there would not be an event that aected a majority of one
group but not the other) with the exception of subsea cables.
Essentially, the only aspect dierentiating individuals or rms
in the treatment group from members of the control group is
that those individuals and rms in the treatment group may
have much greater potential to access (or benet from) high-
speed internet after subsea cables arrive.
Applying DID in this way teases out the eect of subsea
cables from various potential confounding factors such
as distance to other infrastructure and arguably any other
shocks that may aect employment status, in addition to
time invariant characteristics (which are inherently controlled
3.1.2 Synthetic Control (SC)
SC estimates the impact of subsea cables on aggregate
economic outcomes (including employment) by comparing
South Africa’s actual outcomes after subsea cable arrivals
to a synthetic counterfactual. A synthetic counterfactual, in
essence, is an alternative version of South Africa that did not
experience the subsea cable landing but for which all other
prevailing macroeconomic trends continued. The counterfac-
tual is a weighted combination of similar countries which did
not receive subsea cable landings during the time period of
We use a weighted combination of multiple countries
because the resulting counterfactual is more similar to South
Africa across a variety of important and relevant dimen-
sions, such as GDP per capita, sectoral labor composition,
and urban population share, than any single comparison
country alone. The construction of the counterfactual uses a
completely computationally-driven matching technique that
optimizes the t of the counterfactual based on the countries’
actual data. Importantly, the estimated counterfactual can be
tested for its robustness and reliability, which helps quantify
condence in each set of results. See also Figure 4.
The country-level data come from the Penn World Table
(PWT) and the World Bank’s World Development Indicators
(WDI) (Feenstra et al., 2015; World Bank Group, 2019). These
sources provide relevant national statistics from ocially
recognized sources, which are then standardized using
well-documented methodology. Importantly, the detailed
methodology and data quality control measures used to
standardize the data enable comparison across countries
Figure 3. Dierence in Dierences Technique for Analysis of the
Impact of Subsea Cables
16 South Africa Companies and Intellectual Property Commission,
17 Many things aect employment status, but factors that would bias the DID estimates are events that occurred between the baseline and endline surveys that dierentially aected
the outcomes of the two groups. Based on the method of treatment assignment, it is highly unlikely that an event systematically aecting employment
| Page 9Economic Impacts of Submarine Fiber Optic Cables and Broadband Connectivity in South Africa
and over time, and thus for our application of SC to match on
a variety of important macroeconomic characteristics and
3.1.3 Simultaneous Equations Model (SEM)
SEM estimates the eect of subsea cables on GDP per capita
over a long period of time by modeling national economic
output and the market for broadband as a system of simul-
taneous equations. International bandwidth and broadband
penetration are highly correlated with economic growth
(GDP per capita), but this alone does not reveal anything
about the causal relationships between either of the two
broadband variables and GDP per capita (The Economist
Intelligence Unit, n.d.).
It could be the case that international bandwidth and broad-
band penetration have positive eects on GDP per capita,
if broadband availability and speed enable the formation
of new start-ups and/or the growth of some existing busi-
nesses. Meanwhile, or alternatively, it could be true that GDP
per capita has a positive eect on international bandwidth
and broadband penetration because more resources are
potentially available to invest in subsea cables and other
broadband infrastructure. Moreover, it could be that neither
of the two broadband variables cause change in GDP per
capita and vice versa, and that instead the three vary together
because they are driven by other distinct variables. These
complexities are illustrated in Figure 5.
Jointly estimating the system of equations representing the
aggregate economy and the dynamics of supply and demand
within the broadband market enables us to more accurately
approximate the causal impact of subsea cables on GDP per
capita. The SEM approach accounts for the mutually rein-
forcing relationships (potential feedback loops arising from
reverse causality) as well as other key explanatory factors,
thus isolating the eects of a) increases in economic growth
attributable to international bandwidth and broadband
penetration, and b) increases in the demand and supply of
international bandwidth and broadband penetration attrib-
utable to increases in economic growth.
Figure 4. Synthetic Control Technique for Analysis of Subsea Cables
Figure 5. Synthetic Control Technique for Analysis of Subsea Cables
in Broadband
Stock of
Penetration or
Price or
| Page 10Economic Impacts of Submarine Fiber Optic Cables and Broadband Connectivity in South Africa
We interviewed 10 South African broadband connectivity
experts with telecommunications rms, research entities,
and government agencies. Interview topics included current
connectivity trends and challenges (e.g., network expansion,
latency, aordability), public-sector priorities driving network
expansion, role of subsea cables in the broader landscape
of connectivity and internet quality, role of connectivity in
economic development, and future trends and issues. So
that interviewees could be open and candid, we advised
that participation could be condential, that we would not
attribute responses to individuals, and that only the synthe-
sized remarks of all interviewees would be presented in our
Table 4. Similarities and Dierences of Econometric Analysis Strategies
Subsea cables (explicitly) � �
Broadband penetration and international bandwidth
(implicitly related to subsea cables)
Discrete point-in-time impacts � �
Average impact over the long-run
Employment � �
Economic growth ���
Spatially-specic impacts (specic to ber-connect-
ed areas)
Spatially-inspecic impacts (at the country-level) � �
Data aggregation
Microdata geocoded to identify individuals/rms in
ber-connected/unconnected areas within countries
Macrodata on countries (national statistics) � �
| Page 11Economic Impacts of Submarine Fiber Optic Cables and Broadband Connectivity in South Africa
Subsea cable arrivals in South Africa have caused modest
increases in employment in areas connected to terrestrial
ber infrastructure. At the national level, we found no overall
impact on employment, but we did nd a 6.1% increase
in GDP per capita. This suggests that cables have caused
productivity increases that are concentrated in certain
regions and industries.
In 2019, Hjort and Poulsen estimated that the international
data connectivity enabled by subsea cables increased the
likelihood of being employed by 2.2% in areas within the
average ber connectivity radius, as seen in Figure 6. This
implies that for each 1 million people living in an area that is
or becomes ber-connected, 22,000 additional people tend
to become employed.
Positive eects were also found on net rm creation in areas
connected to the ber infrastructure. Hjort and Poulsen
found robust evidence of an increase in net rm entry per
quarter of about 23%. The impact was greatest in the nan-
cial sector with a quarterly net increase in nancial rms of
almost 16%, followed by the services sector with a quarterly
net increase in services rms of 12%. Both sectors utilize ICT
relatively intensively (World Bank, 2006).
We estimated impacts on GDP per capita, both in the
short-run (to estimate recent eects which would most
approximate new cable impacts) and over the long-run (to
understand the role of connectivity in economic growth).
This focused on the country as a whole and does not compare
regions connected to ber with those which are not.
For the country overall, we found evidence of impacts on GDP
per capita in both the short- and long-run, but no impacts
on employment. This suggests that employment gains in
connected areas may be oset by losses in unconnected
areas or that the job gains simply are not large enough.
The eects on GDP per capita reect the impacts of subsea
cable arrivals beginning in 2009 (e.g. SEACOM, EASSy,
WACS) that had accumulated by 2014. Figure 7 shows the
divergence of South Africa from the estimated synthetic
counterfactual (what would have happened had subsea
cables not arrived).
4. Economic Impacts of Subsea Cable Landings
Figure 6. Impact of Subsea Cables on Employment Among Working
Age Individuals in Areas Near Terrestrial Fiber
Source: Hjort, J, Poulsen, J. 2019. The Arrival of Fast Internet and
Employment in Africa. American Economic Review, 109(3): 1032-1079.
Likelihood of being
employed if one lives within
10 km of ber
Increase in the likelihood of
being employed if one lives
within the average radius for
ber connectivity
2.2% Figure 7. Estimated Eect of Subsea Cables on GDP per Capita
Source: Authors’ estimates.
| Page 12Economic Impacts of Submarine Fiber Optic Cables and Broadband Connectivity in South Africa
In 2014, 5 years after the rst of these arrivals, South Africa’s
actual GDP per capita was $696 greater (6.1% greater) than
the counterfactual. In other words, without these subsea
cables, we estimate that South Africa’s GDP per capita in 2014
would have been $11,401 rather than the actual $12,097, as
shown in Table 5.18 The cumulative eect grows from 2009
to 2014, with the largest incremental impacts occurring soon
after the rst subsea cable arrived.
Figure 8 shows the total impact on GDP. Beginning in 2010 we
see the impact of rms and individuals leveraging improved
connectivity into economic growth such that we observe
year-on-year changes. We estimate that if South Africa had
not been able to do so its annual economic growth would
have been lower. In 2014, GDP would have been $621.7
billion (at 2011 USD PPP) instead of $659.7 billion.
18 All U.S. dollar values are in 2011 USD PPP. All South African rand values are in 2011 ZAR.
Table 5. Impact of Subsea Cables’ Connectivity on GDP per Capita
Source: Authors’ estimates.
2009 2014
2011 USD PPP
Actual 11,400 12,097
Counterfactual — 11,401
Dierence — 696
2011 Rand
Actual 55,741 59,148
Counterfactual — 55,745
Dierence — 3,403
Figure 8. Estimated Impact of Subsea Cables’ Connectivity on South Africa’s GDP at PPP
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
GDP in the absence of connectivity improvements from
new subsea cables
GDP impact catalyzed by improved connectivity from
subsea cables
Before major
subsea cable
GDP (Billions of 2011 USD PPP)
Subsea cables landing in 2009 catalyzed a 6.1% increase in GDP by 2014. This chart presents values
at purchasing power parity (PPP), which accounts for changes in living standards over time. Doing
so presents the most accurate picture of the impact that the connectivity improvement from subsea
cables makes on people’s lives. At PPP, in 2014 GDP was $659.7 billion instead of $621.8 billion.
For reference, in nominal terms (without any adjustments to measure living standards across time and
countries), South Africa’s GDP was $351 billion in 2014.
467.0 488.2 514.0 542.8
571.9 590.1 581.1 589.7 599.6 604.9 611.6 621.7
467.0 488.2
| Page 13Economic Impacts of Submarine Fiber Optic Cables and Broadband Connectivity in South Africa
Over the long run, we found large positive eects of both
international bandwidth consumption per user (IBWPU) and
broadband penetration on GDP per capita.
Our estimates suggest that each 10% increase in South
Africa’s IBWPU leads to a 0.15% increase in GDP per capita.19
See Table 6. Illustratively, the impact of IBWPU over the past
22 years (1995 to 2017) amounts to an increase in GDP per
capita of $966.
We identied similar eects of broadband penetration on
GDP per capita. Each 10% increase in broadband penetra-
tion led to a 0.27% increase in GDP per capita. See Table 7.20
Illustratively, the impact of broadband penetration over the
last 15 years (2002 to 2017) amounts to an increase in GDP
per capita of $1,707.
Taken together, the ndings lead us to the conclusion that
subsea cables have caused productivity increases in South
Africa. Impacts on GDP per capita are complemented by the
evidence indicating positive impacts on net rm entry in
high-productivity sectors but only modest impacts on overall
employment in connected areas. Cables have caused greater
increases in output relative to the number of new jobs.
This suggests that they are facilitating modernization and
enhanced productivity in the South African economy.
The modest positive eects identied on employment in
ber-connected areas oer the best estimate of the likely
impacts for areas that will be connected to ber in the future.
To estimate potential job creation, we must assume that the
causal eect already estimated for ber-connected areas
holds, on average, for areas that are still unconnected.
Figure 9 depicts the estimated actual and potential job
creation for all of South Africa, calculated by applying the
eect on employment (i.e. the increase in the likelihood
of being employed) by population density (per square
kilometer). For connected areas, the map shows the actual
estimated job creation. For unconnected areas, the map
shows potential job creation if these areas were connected
(assuming the average causal eect holds). The key implica-
tion is that connecting the most densely populated areas that
are currently unconnected would translate to the greatest
increases in total employment.
Numerous factors inuence whether the estimated eects
will hold in areas that are connected in the future, including
19 These estimates describe the average eect of past changes in IBWPU in South Africa on GDP per capita but are not necessarily predictions of the eects of future changes, which will be
determined in part by future circumstances of the country.
20 These estimates describe the average eect of past changes in broadband penetration in South Africa on GDP per capita but are not necessarily predictions of the eects of future
changes, which will be determined in part by future circumstances of the country.
Figure 9. Actual and Potential Job Creation as a Result of Subsea
Cables and Expanded Terrestrial Fiber
Table 6. Impact of International Bandwidth Consumption per User
on GDP per Capita
‡ p-value = 0.529 † p-value = 0.052
Table 7. Impact of Broadband Penetration on GDP per Capita
‡ p-value = 0.01 † p-value = 0.01
For every 10% increase in
IBWPU, there has been a 0.15%
increase in GDP per capita
Years: 1995 – 2017
Range of Estimate
0.11% – 0.18%
For every 10% increase in
broadband penetration, there has been a
0.27% increase in GDP per capita
2002 – 2017
Range of
0.26% – 0.28%
| Page 14Economic Impacts of Submarine Fiber Optic Cables and Broadband Connectivity in South Africa
improvements to the technology, education levels of people
living in those areas, and composition of those local econ-
omies. Obviously, the farther into the future one forecasts,
the greater uncertainty there is around the magnitudes of
those impacts, owing to the potential for a large degree of
change from current conditions. Nonetheless, even if the
eect of connecting new areas turned out to be smaller than
for the eects already identied, the potential gains in terms
of absolute number of jobs would be socially and econom-
ically meaningful. The same reasoning applies to rms and
economic output in areas that are presently unconnected to
terrestrial ber.
The arrival of the country’s rst commercial undersea cable,
SEACOM, in 2009, is widely credited with having disrupted
the market, with having brought prices down, and with
having stimulated broadband uptake. The undersea cable
market initially only became open to competition with the
expiry of Telkom’s exclusivity over the provision of telecom-
munications services in 2002, but new cables were initially
slow to arrive, hampered in part by unclear policy signals. 21
First to land, SEACOM immediately targeted pricing as its
competitive advantage, oering prices 15 times lower than
those obtainable via Telkom’s SAT-3. This impacted the market
even ahead of SEACOM’s arrival as Telkom sought to under-
cut the competitive advantage of the new entrant (Muller,
2009). Wholesale prices continued to tumble dramatically
in the years that followed. Interviewees described how the
availability of international bandwidth to consumers in the
medium term was aected in several ways; initially, through
increases in bandwidth allocation to customers, along with
improvements in service quality, and, subsequently through
substantial cuts in bandwidth prices (Esselaar, Gillwald, Moyo,
& Naidoo, 2010).
The arrival of SEACOM initiated a urry of subsequent
landings—EASSy in 2010 and WACS in 2012—with a similar
upsurge elsewhere in Africa. It initiated substantial market
and value chain disruption: the cost balance between inter-
national data and local access was turned on its head, and
the wider range of service options and cheaper prices, led to
substantial growth in the ISP market and an upsurge in the
internet user base (Goldstuck, 2012). This section reviews
interviewees’ perspectives on the impact of subsea cable
Experts emphasized the importance of understanding trends
in the telecommunications sector as key to understanding
the economic development potential of improvements in
21 See also Esselaar, S, Gillwald, A, Moyo, M & Naidoo, K (2010), South African Sector Performance Review 2009/2010, Research ICT Africa, Cape Town, South Africa.
5. Stakeholder Perspectives
on Connectivity
Table 8. Key ICT Indicators for South Africa
Source: International Telecommunication Union and Ookla Speedtest.
Electrication 84% of population with access to electricity 2017
Internet users 56% of population 2017
Fixed broadband subscribers 2.4 subscriptions per 100 inhabitants 2018
Fixed Broadband Speed 2 megabits per second 2017
Fixed Broadband Monthly Subscription Charge 8.86 2011 USD PPP 2017
Mobile Cellular Subscribers 153 subscriptions per 100 inhabitants 2018
Mobile Download Speed 31 megabits per second 2020
Mobile Broadband Prepaid Subscription Charge 5.31 2011 USD PPP per 500 megabits 2017
| Page 15Economic Impacts of Submarine Fiber Optic Cables and Broadband Connectivity in South Africa
South Africa’s telecommunications market over the last
25 years has seen a dicult evolution under a process of
‘managed liberalization’ towards a competitive structure. A
key 2008 court ruling, the Altech judgement, is widely viewed
as marking a key turning point, leading to an explosion of
players with licenses to build infrastructure and provide
Nevertheless, the mobile market remains eectively a
duopoly, dominated by Vodacom and MTN, with market
shares by service revenue of 49% and 32%, respectively
(CompComm, 2019, p. 87). The two smaller players, Cell
C (12%) and Telkom Mobile (7%) have struggled to make
inroads. Together, this gives the mobile market a highly
concentrated HHI score of 3,614.22 Interviewees suspect
that limited competition may be a factor in the aordability
challenge that inhibits further broadband uptake. (This will
be explored in greater detail later.)
The availability of mobile services is near universal and of
advanced quality—described by one interviewee as a “good
job” done by the licensees. Population coverage of the 3G
network now stands at 99%, with 86% reached by 4G/LTE
(ICASA, 2019). As we discuss further below, network availabil-
ity does not necessarily mean access because of aordability
Uptake is correspondingly high, with per capita SIM card
penetration now in excess of 160%,23 and with 97% of
households having access to a mobile phone (Stats SA, 2019).
Mobile broadband subscriptions stand at 66 million active
data SIM cards, with xed broadband subscribers topping
7.5 million, and machine-to-machine SIMs reaching 7 million
(ICASA, 2019). Device penetration, too, is at a high 82%
(ICASA, 2019), although considerable numbers of users cling
stubbornly to 2G handsets (Vermeulen, 2017).
The mobile market is now in the throes of a clear swing from
voice to data, with data revenue growing faster than voice,
and now making up 44% of service revenue for Vodacom, for
example. Third-ranked operator, Cell C, has been unable to
make substantive inroads into the market, leaving it in dire
nancial straits, prompting a last-ditch turnaround strategy
that has seen it reject a takeover oer from Telkom Mobile
in favor of a roaming deal with MTN. Telkom Mobile too has
recently reported at margins, despite experiencing substan-
tial subscriber growth.
South Africa’s ber sector, by contrast, is regarded as robust
and highly competitive. The early pioneers, Dark Fibre Africa
(which began renting ber cables out to licensees in 2007)
and Vumatel (which launched the country’s rst ber-to-the-
home services in an upmarket Johannesburg suburb in 2014)
have since been joined by a multitude of others.
The country’s ber backbone is substantial and growing,
with a network in excess of 200,000 km. In addition to the
backbone networks of Telkom, Vodacom, and MTN, major
providers include: Broadband Infraco (15,000 km); Dark Fibre
Africa (10,000 km); Liquid Telecom (10,000 km); Vumatel
(8,000 km); and SEACOM (4,000 km).24
Terrestrial ber connections are available in proximity to
major cities and towns due to South Africa’s extensive domes-
tic network. This means that most of the population lives
within 10 km of ber. However, there is a lack of incentive for
last-mile infrastructure development beyond the country’s
backbone, meaning connections to remote or impoverished
areas are generally much more expensive and much less
available to the public.
The provision of ber-to-the-home connectivity has
expanded dramatically in recent years, with some 35 players
now connecting over 600,000 homes, in a market growing at
upwards of 30% per annum (FTTX Council, 2019). The more
auent, higher-density metropolitan areas have now largely
been covered, with the focus now shifting to smaller towns
and less auent, high-density areas.
South Africa’s international telecommunications access is
well-served by subsea cables. The country is connected to
multiple high-speed undersea cables: SEACOM, EASSy, WACS
and ACE (see section above). A number of additional under-
sea cables South Africa are reportedly in various stages of the
planning process. These include: Google’s Equiano, linking
Portugal and South Africa; Facebook’s 2Africa project that
will encircle the continent; the MElting poT Indianoceanic
Submarine System (METISS), linking South Africa and
Mauritius; and, possibly, a proposed cable linking South
Africa to the USA.
22 The Herndahl-Hirschman Index is a standard measure of concentration in a market. A score of above 2,500 indicates a concentrated market.
23 Partly due to multiple SIM ownership, and the growing proliferation of M2M / IoT SIM cards.
24 There have been a number of mergers and acquisitions in the ber space in recent years: Liquid Telecom acquired NeoTel in 2017; SEACOM bought FibreCo in 2018; and Remgro’s
Community Investment Ventures Holdings (CIVH) secured Competition Commission permission in 2019 to add Vumatel to its existing stable of Dark Fibre Africa and SA Digital Villages.
| Page 16Economic Impacts of Submarine Fiber Optic Cables and Broadband Connectivity in South Africa
As a result, South Africa’s international bandwidth runs at an
average of 850 Tbps, nearly two-thirds of which is inbound
trac (ICASA, 2019). As a result of the volume of interna-
tional inbound trac, an increasing number of providers are
moving content caching and data centers onshore, a trend
seen as important by several interviewees. The long-standing
local Internet exchange points in Johannesburg, Cape Town
and Durban have been overtaken by more than 20 carri-
er-neutral data centers, mainly in Johannesburg, provided by
the likes of Teraco, Africa Data Centres, Internet Solutions, and
Liquid Telecom. Historically, peering has been on a ‘bill and
keep’ basis with no payments to third parties, although that
arrangement looks set to change, at least at SEACOM’s new
data centers (Muller, 2019).
There is considerable pessimism as regards the ability of
policy and regulation to break the stranglehold of the mobile
duopoly in the market. Several interviewees, however,
suggested that the market is ripe for disruptive intervention
by a hyperscale platform or OTT provider with sucient
resources and transnational scaling to challenge the incum-
There are a number of trends and developments likely to
feature prominently in the market over the next year or so.
These include:
Following a policy direction from the Minister, the regulator
is moving ahead with plans to auction a number of lots of
high-demand spectrum (ICASA, 2019), some in the current-
ly-occupied digital dividend bands, but others in bands
suitable for 4G and mid-range 5G deployments. Given the
nancial constraints facing the markets, it is unclear which
players, beyond the duopoly of Vodacom and MTN, have the
resources to enter the auction.
At the same time, ICASA will be moving ahead with the
licensing of a controversial wireless open-access network
(WOAN) provider (ICASA, 2019), subject to certain privileged
conditions and set-asides. It is, again, unclear at this stage
which consortia will be entering the fray, which has complex
linkages to the high-demand spectrum auction.
The recently released ndings of the Competition
Commission’s Data Service Market Inquiry (CompComm,
2019) have been bitterly opposed by Vodacom, MTN and
Telkom. The ensuing squabbles and the modalities of
their implementation are likely to consume considerable
regulatory focus over the coming year and will put consid-
erable pressure on the prot margins of providers across the
At the same time, the sector regulator has initiated a parallel
and overlapping investigation into the mobile broadband
market (ICASA, 2019), with provisional suggestions that site
access and roaming are areas requiring regulatory interven-
The recently re-amalgamated Department of
Communications and Digital Technologies is also
expected to introduce legislation to revise the Electronic
Communications Act, which may see changes to the powers
and functions of the regulator, and to the size and scope of
the universal service fund.
Finally, the country’s Presidential Commission on the Four th
Industrial Revolution is expected to release its report and
recommendations during 2020. The content of these is
currently unknown, but it is likely to see the sector receiving
greater attention from policymakers going forward.
There are a number of factors that have contributed to the
expansion of South Africa’s telecommunications network
over the last decade. The opening up of the market and
consequent expansion of infrastructure and services
happened despite rather than because of policy and regula-
tory intervention.
A number of interviewees pointed to the pivotal impact
of the 2008 Altech court case.25 It was a ruling which over-
turned an attempt by the then Minister of Communications,
Ivy Matsepe-Casaburri, to limit the number of infrastruc-
ture licenses being granted under the 2005 Electronic
Communications Act. As a result, the regulator was obliged
to issue licenses permitting all ISPs and VANS to self-provide
by constructing their own networks. Network expansion
through self-provisioning, constrained until then under the
policy of ‘managed liberalization’, was thus unleashed by the
courts. And the Altech ruling allowed the major operators,
Vodacom and MTN, to construct their own networks, rather
than having to lease bandwidth from Telkom.
25 So-called af ter the interdict lodged by Altech Autopage against the selective awarding of individual infrastructure licences to certain VANS operators during the
conversion of existing licences to the new technology-neutral framework of the ECA. After several appeals, the Minister nally capitulated.
| Page 17Economic Impacts of Submarine Fiber Optic Cables and Broadband Connectivity in South Africa
Other pivotal points in network expansion and user uptake,
according to sector analyst, Arthur Goldstuck, include the
advent of ADSL and its resale to ISPs, the advent of the smart-
phone, and the burgeoning FTTH market.
Some years later, with internet access and broadband assum-
ing greater importance for universal access, and increasingly
being seen as a key enabler and driver of economic growth,
the Ministry moved to develop and adopt a national broad-
band plan, ‘SA Connect’ (DoC, 2013), through a process of
public consultation. SA Connect, however, was over-gen-
eralized and lacked any clear priorities or implementation
plan, and is now widely regarded as having failed, with
rollout targets repeatedly missed and its National Broadband
Council in disarray.
The proposal to establish a wireless open-access network
(WOAN) seems to have originated at around the same time,
driven by the same imperative to address the failure of the
market to provide broadband infrastructure to under-ser-
viced areas and communities. Envisaged as a public-private
partnership, it forms a key component of SA Connect. It has
extensively been criticized as an untested experiment but
is currently in the preparatory stages of being licensed. The
principle of open access—cost-based mandatory infra-
structure sharing and facilities leasing—has been rather
less controversial. Indeed, it was essentially the business
model behind Dark Fibre Africa, and is now seen by the FTTX
Council, as a key to infrastructure rollout.
There are a number of factors which are seen by the industry
as driving up the cost of network and services rollout and as
the cause of unnecessary delays.
The rst of these is the shortage of spectrum, described by
many as a “bottleneck. There has been no new assignment of
spectrum to licensees for more than 10 years. In 2011 ICASA
tabled a proposal to auction high-demand spectrum (ICASA,
2011), but this was subsequently withdrawn. Faced with the
ensuing spectrum crunch, operators resorted to refarming
what spectrum they had, and to constructing additional base
stations, both of which served to increase the costs of service
provision. Other licensees, despite the Altech judgement,
without access to the necessary spectrum, have been unable
to launch services. In this context, the forthcoming spectrum
auction oers welcome relief, although there are concerns
that high reserve prices and onerous universal service
obligations may force some providers out of the running, and
drive up the cost of service provision , with a knock-on eect
on consumer prices and on aordability.
The cost of deployment is also a factor inhibiting network
rollout, particularly in view of the long distances required to
reach rural areas, where revenues per user are low, and return
on capital marginal, especially in the absence of key anchor
tenants, such as schools, clinics, local government oces and
the like.
The lack of a national set of rapid deployment guidelines,
structures and processes was repeatedly cited by interview-
ees as a key bottleneck holding back network deployment.
This lacuna is viewed as a key policy, governance and regu-
latory challenge. It is a challenge all the more glaring since
the development of a rapid deployment framework has
been required in legislation since 2005, with a rm, legislated
12-month deadline assigned to the Minister in 2014. A recent
attempt to amend the Act to include detailed rapid deploy-
ment specications collapsed, when the Bill was withdrawn
at the end of 2018.
A comprehensive rapid deployment framework would be
able to address a number of issues associated with rights
of way and wayleaves, with trenching making up some
two-thirds of network construction costs. Currently, rights
of way permissions need to be sought from multiple enti-
ties, including local governments, roads, water, electricity
and railway authorities. Further, there are no country-wide,
standard rules and procedures. As a result, the application
process is cumbersome, arbitrary and time-consuming.
Further, many local governments see wayleaves as a cash
cow, setting highly variable, often exorbitant fees. In addi-
tion, lack of co-ordination and inadequate network mapping
creates problems, some of which might be addressed by
single trenching policies, given that the cost of trenching is
around two-thirds of network capital expenditure. In addi-
tion, local communities often demand to be employed on
network projects, with refusal to meet their demands leading
to sabotage of the rollout.
Vandalism and theft are also ongoing problems plaguing
network infrastructure, with copper cable and base station
batteries, generators and solar panels a particular target—so
much so that mobile operators have closed down a substan-
tial number of base stations in vulnerable areas, and that
| Page 18Economic Impacts of Submarine Fiber Optic Cables and Broadband Connectivity in South Africa
Telkom has discontinued the use of ADSL and other copper
However, despite challenges, South Africa now has an
extensive national broadband backbone, fully and seamlessly
integrating both ber and wireless components.
South Africa has excellent broadband infrastructure,
as repeatedly alluded to in the interviews. The market
constraints are seen to be heavily on the demand side. It is
important, therefore, to look at the uptake proposition and
the factors inuencing demand.
Content was widely viewed by interviewees as the key
demand side driver. One interviewee, for example, pointed to
the exponential increase in data trac, driven by the “appe-
tite for content”. This is particularly so for mobile prepaid data
where revenue increased by 8.5% in 2018, whilst prepaid
voice and messaging both decreased, by 2.9% and 22.4%
(ICASA, 2019, p. 18). The FTTX Council identies demand
for streaming audio and video as a key bandwidth driver.
Others identify an appetite for gaming amongst the young
and the unemployed, along with the popularity of apps
such as YouTube, TikTok, and Instagram. Certainly, uptake
of streaming services has burgeoned in recent years, with
video content provider Netix having an estimated 300,000
subscribers, and streaming now accounting for some 9% of
audio-visual content consumption (Bustech, 2019). Indeed,
the trend has prompted SABC, the public broadcaster, and
dominant pay-tv provider, MultiChoice, to announce the
launch of subscription streaming services.
Local peering and caching arrangements, though the histor-
ical Internet exchange points (IXPs) and the more recent
establishment of data centers, are both a consequence of
the demand for data and content and a driver of uptake. For
example, research into the evolution of the Internet in South
Africa pointed to the establishment of the country’s rst IXPs
as pivotal in stimulating Internet demand (Lewis, 2005).
Figure 10. Pricing Dierentials: Pre-Paid Data Bundles vs Post-Paid Data Contracts
Source: Wireless Access Providers Association.
0,02 0,03 0,1 0,3 0,5 1 8 10 12 20 40 60 80
Data Price per GB
Pre paid data bundles Post paid 24 month data contracts
0.02 GB for R10
80GB for
R499 a
Low income
Only data option available
High income
One of many data options available
80 x more
per GB
MTN Vodacom
| Page 19Economic Impacts of Submarine Fiber Optic Cables and Broadband Connectivity in South Africa
The demand for data notwithstanding, high prices and lack
of aordability are widely seen by interviewees as a brake
on access and uptake. South Africa’s mobile broadband
coverage reaches over 95% of the population, but more than
40% of the population do not use the Internet. Those that do
overwhelmingly use mobile data. Further, data consumption
for the poor largely proceeds via small prepaid purchases (as
little as 20 MB at a time), whilst the auent purchase post-
paid data plans that are orders of magnitude cheaper per
gigabyte (Figure 10).
Research ICT Africa notes that South Africa’s data prices
are less competitive when compared to other countries in
Africa. And, whilst data prices have indeed fallen substan-
tially in recent years, the Competition Commission’s recent
Data Services Market Inquiry estimates there is room for
Vodacom and MTN to cut retail prices by a further 30%-50%
(CompComm, 2019), a move that sector analyst Arthur
Goldstuck suggests will be fought “tooth and nail”. The
Commission’s report goes on to propose a number of
immediate interventions designed in particular to address
aordability for poorer users, including: removal of tiered
pricing for smaller prepaid data bundles;26 provisions of a
daily free lifeline data allocation to all users; and zero-rating
of educational and public-benet content. Controversial and
costly to the providers as some of these recommendations
might be, and with implementation modalities still to be
negotiated, together they have the potential substantially to
stimulate uptake and demand of data and online content of
various forms. The availability of budget-priced smartphones
is also seen as a key to driving uptake: for example, MTN
recently launched a sub-$20 basic smartphone handset.
Together, the widespread availability of aordable access and
relevant content have the potential to stimulate and grow the
data services market. As Goldstuck remarks: “When you have
unlimited access the Internet becomes commodity rather
than a scarce resource.
The policy and regulatory environment in South Africa is
widely regarded as having been marked by lack of coherence,
sluggish policymaking, and failures of implementation until
2018. Despite a much-vaunted review of ICT policy, launched
in 2012, government was slow to respond to and implement
its recommendations, only belatedly releasing a resultant
policy white paper (DTPS, 2016).
The recent re-amalgamation of the Department under
a young and enthusiastic Minister, following the recent
election victory of the new ANC administration under the
reformist and anti-corruption President Cyril Ramaphosa has
been widely heralded. Indeed, the new President is seen to be
taking the ICT sector seriously, having established a Fourth
Industrial Revolution (4IR) Commission, with its rst report
The new Minister is a strong proponent of the 4IR and is seen
as committed to connecting the unconnected. Moves to
tackle data prices and the spectrum bottleneck have been
initiated, as discussed above, in addition to the licensing of
the controversial WOAN. A rapid deployment task force has
been established, according to the regulator.
Whilst there is a sense of optimism for the future pervading
the sector, there is some concern that a next generation
regulatory approach needs to be adopted. A recent policy
statement by the Minister alludes to some of the above, list-
ing as her priorities:
Auctioning high-demand spectrum and licensing the WOAN
under a “Digital Transformation Plan”
Fast-tracking the long-stalled broadcasting migration to
digital terrestrial television
• Developing a Government Data Policy for South Africa
• Finalizing a National Digital Skills Strategy
Merging signal distributor Sentech and Broadband Infraco to
form a State Digital Infrastructure Company
Amalgamating the Film and Publications Board and the .za
Domain Name Authority into ICASA
Completing the report of the Presidential Commission on
the Fourth Industrial Revolution
Placing the State IT Agency and the Universal Service and
Access Agency of South Africa under administration (DoCDT,
26 For example, a user buying 1GB of data in 20MB snippets, ends up paying over 300% more. Uncapped data access, originally introduced by
M-Web, is available, but only to post-paid contract subscribers.
| Page 20Economic Impacts of Submarine Fiber Optic Cables and Broadband Connectivity in South Africa
South Africa currently places considerable emphasis on the
4IR, which is seen as a way of leveraging the role of ICT in
restoring the country to economic growth. Appointed in
early 2019, a 30-person National Commission, headed by
President Ramaphosa, contains a number of high-prole
appointments from the sector and from academia. It has
been tasked with developing an integrated national 4IR
strategy, backed by a research program and an institutional
framework, in order to enhance competitiveness, and to
address issues pertaining to skills development and the
future of work. The Commission has divided itself into work
streams focusing on:
• infrastructure and resources;
• research, technology and innovation;
• economic and social impact;
• human capital and the future of work;
• industrialization and commercialization; and
• policy and legislation.
A draft report was submitted to the President in November
2019 but has yet to be released publicly.
In an earlier eort to increase the economic and develop-
mental impact of ICT, the Department in 2017 released a
national e-Strategy (DTPS, 2017) and a national e-Govern-
ment Strategy (DTPS, 2017), but the prole, implementation
and impact of these has been extremely limited at best.
Eorts towards e-Government remain mired in the ongoing
problems of maladministration and corruption bedeviling
the State IT Agency (Prior, 2019).
Government has also sought to increase the role of small-
and medium-sized enterprises in economic growth and
job creation, and in the ICT sector, following the release
in of a Development Strategy for SMMEs in the ICT sector
(DTPS, 2017), which is in part buttressed by ongoing work
to strengthen broad-based black economic empowerment
in the sector through the promulgation of BBBEE ICT Sector
Code and the establishment of a B-BBEE ICT Sector Council.
The SMME strategy has yet to be properly implemented, but,
in parallel there exists a thriving ecosystem of tech hubs and
ICT incubators (Giuliani & Ajadi, 2019).
Several interviewees pointed to the lack of digital skills
across the society as a key challenge. Digital skills are
an important foundation for citizens and consumers to
interact with modern ICT, a critical requirement for job
creation in conjunction with ICT technologies and those
of the 4IR, but remain highly skewed along historical lines
of racial and income disparities. The ICT sector too has for
many years been aicted by a persistent, ongoing skills
gap (Schoeld & Dwolatzky, 2019). However, a number of
initiatives to address the question of digital skills are under
way. The Department has established the iKamva Digital
Skills Institute, and is in the process of developing a National
Digital Skills Strategy. Coding as a subject is to be introduced
into schools, and a program to provide learners with tablets
and digital and online content is planned. There are also a
number of disparate private sector initiatives to teach coding
and to address the digital skills gap, including by Cisco and
the ITU.
Whilst the providers interviewed tended to be more focused
on commercial imperatives, there is widespread recognition
of a substantial digital divide in South Africa. It is a divide that
primarily aects the poor, the unemployed, and those living
in rural areas. For historical reasons, its victims are dispropor-
tionately black South Africans. The scenario is often referred
to by sector insiders as a new digital apartheid.
Certainly, the telephony divide has largely disappeared. The
percentage of black South African households with either a
xed-line or a mobile telephone in their homes soared over
the last 25 years to reach 94% (Stats SA, 2015, p. 25). However,
white households still remain better connected, with house-
hold telephony penetration standing at 99%. The most
recent gures, no longer disaggregated by race, show that
over 96% of all households have functional access to tele-
phony (Stats SA, 2019).
The technological underpinnings of the digital divide in
South Africa have now shifted towards the Internet and to
broadband. A recent report describes the Internet divide as a
vast and multi-dimensional one “that stretches across almost
every imaginable sector of society, from geography and
location to income and education” (World Wide Worx, 2017).
Indeed, whilst the majority of South Africans (65%) report
| Page 21Economic Impacts of Submarine Fiber Optic Cables and Broadband Connectivity in South Africa
having access to the Internet, this is largely a mobile phenom-
enon, with only some 10% having access to the Internet
at home. Worse, the urban vs rural Internet divide is stark,
between, for example, metropolitan Western Cape (where
some 31% of households have access at home) and rural
Limpopo and North West (where less than 1% of households
do) is stark (Stats SA, 2019). Income disparities in Internet
access are equally stark, with Goldstuck reporting that some
82% of rich South Africans have personally accessed the
Internet in the last year, compared to 30% of the poorest
(World Wide Worx, 2017). Technologically, it is eectively a
two-tier market, with rich households enjoying FTTH access
whilst the poorer majority have to rely on mobile handsets.
Accordingly, a number of the interviewees stressed the social
imperative of connectivity, speaking about the need to
address the Internet divide by providing universal aordable
access for all to broadband-enabled services and content. It
is an imperative that is viewed as eminently achievable. As
Research ICT Africa’s Gillwald points out, 90% of the popula-
tion resides within 10 km of the ber backbone.
The SA Connect national broadband plan, noted above, was
a structured intervention designed to address precisely this
divide. But it is an intervention that is widely recognized as
having repeatedly and dismally failed to achieve its targets.
An initial, controversial attempt to appoint Telkom as the
lead delivery agency was withdrawn, and the project was
then put out to tender through the troubled State IT Agency.
The tender was subsequently withdrawn, with none of the
bidders meeting the pre-qualication criteria. Reporting
has largely focused on rollout targets of connecting govern-
ment facilities, such as schools, clinics, post oces and police
stations, but by mid-2018 only 187 out of a planned 327 sites
had been connected. As a result, the Department is currently
casting around for alternative best-practice rollout models
(Mzekandaba, 2019). SA Connect’s target of providing 90%
of the country’s population with Internet access at 5 Mbps
by 2020 (DoC, 2013) now looks to be a hopeless pipe-dream.
Nonetheless, the need for a country-wide intervention to
secure the pervasive provision of ber, along the lines of a
national “Marshall Plan”, as alluded to by Goldstuck, remains
The country’s universal service fund, despite interventions in
rolling out telecentres and other forms of connectivity, has
proven singularly inept in supporting initiatives to connect
under-serviced areas, and remains mired in its history of
corruption and lack of sustainability.
Nevertheless, addressing the digital divide and the objectives
of SA Connect remain a key priority. The FTTX Council, for
example, continues to see ‘connecting the unconnected’ and
‘FTTH for all’ as central policy objectives, and suggests greater
involvement on the part of the private sector is necessary.
Certainly, recent forays by some of its member companies
into poverty-stricken township areas in Johannesburg and
Cape Town hold out the promise of a commercial model to
provide aordable Internet access to the poor, albeit focused
on high-density areas (Mzekandaba, 2019). Attempts to
develop commercially viable Internet access models for
poorer rural communities, along the lines of the Project
Isizwe subsidized basic access model, await proof of concept.
| Page 22Economic Impacts of Submarine Fiber Optic Cables and Broadband Connectivity in South Africa
Our work, as well as recent work by Hjort and Poulsen (2019),
point to the importance of subsea cables for South Africa. We
quantied a 6.1% increase in South African GDP per capita
between 2009 and 2014 because of subsea cable landings.
Over the 15-year period from 2002 to 2017, for every 10%
increase in broadband penetration, there was a 0.27%
increase in GDP per capita. Similar results are observed over
an even longer period related to international connectivity
We also note that the increases in GDP have been large rela-
tive to increases in employment, suggesting that the most
notable impact of subsea cables has been on productivity. We
believe that job gains from the improved connectivity deliv-
ered by subsea cables to be concentrated geographically and
within certain industries. Interviewees concurred with our
ndings, noting that although South Africa’s infrastructure is
robust, aordability remains a challenge, inhibiting uptake
and therefore more widespread benets.
As more of South Africa’s economy shifts towards industries
leveraging cutting-edge technology, highly educated and
skilled segments of the labor force may be relatively better
poised to take advantage of the new technology, which
could contribute to widened disparities in socioeconomic
outcomes across certain demographics if left unaddressed.
Similarly, unconnected pockets of South Africa may be left
behind as connected areas further develop.
Interviewees recommended swiftly launching spectrum
auctions and developing rapid deployment frameworks as
actions that would have near-term impacts on access, aord-
ability, and availability. They also advised continuing inquiries
into and addressing pricing practices, particularly for small
prepaid data packages.
Given the country’s history, action to address disparities in
connectivity are essential to mitigate economic disparities.
Policies that help improve access through pricing, such as
market regulation to increase competition among service
providers, would likely contribute to more equitable oppor-
6. Concluding Remarks
| Page 23Economic Impacts of Submarine Fiber Optic Cables and Broadband Connectivity in South Africa
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Economic Impacts of Fiber Optic Subsea Cables
and Broadband Connectivity in South Africa
RTI International
3040 E. Cornwallis Road
Research Triangle Park, NC 27709
November 2020
The authors thank the South African telecommunications experts who
shared their insights and perspectives with us. Thank you also to Steve
Song, who provided reviews and technical guidance that strengthened
this work.
The authors wish to gratefully acknowledge the nancial support of
Facebook, Inc. The research design, method selection, results, and
conclusions are the authors’ alone.
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