Fix the internet, boost employment: economist

 ·1 Aug 2013

A slow internet in South Africa with low penetration rates is hindering the ability to create jobs in the country, according to Kevin Lings, chief economist at financial services company, Stanlib.

Lings’ views echo the sentiment of  DA shadow minister of communications, Marian Shinn, and follows a recent Akamai report which revealed that South Africa has one of the lowest average internet connection speeds in the world.

In Akamai’s report, State of the Internet, SA had the lowest average connection speed of all European, Middle-Eastern, and African (EMEA) countries surveyed.

The report also revealed the following:

  • SA ranks 80th worldwide for average internet connectivity speed;
  • 126th for peak connectivity speed worldwide; and
  • 69th globally for the average speed of broadband connectivity with only 8% able to achieve speeds of 4 Mbps or more. This is far below the global average of 46% and less than a tenth of the global leader, Switzerland, at 88%.

The DA pointed out that the World Bank has identified broadband connectivity as a key catalyst for economic growth, with every 10% increase in connectivity enabling a 1.38% growth in Gross Domestic Product (GDP).

According to Lings, job creation is the number one objective in SA. He says that we make mistakes by assuming that big corporates are the way forward to absorbing large numbers of employees. He says that initially they do, but “then they learn to do more with less people”.

“South Africa unequivocally needs to expand small businesses,” he said, adding that new business will come from service related industries, not from traditional industries like mining and manufacturing.

He explained that that there is a lower barrier to entry for internet businesses with start up costs, and indeed operating costs potentially lower. “But, we need access to the internet, and we need speed,” he said. “We cant get where we need to be without it.”

Lings said that in every country where there was an increase in the access to the internet, along with increased speeds, “you will see an increase in employment,” created by the vast spin-offs. “Its such an obvious win,” the economist said.

The economist pointed out in a research note that global Internet access has grown by almost 600% since the year 2000 to an estimated 2.5 billion users, and is expanding by roughly 200 million new users a year.

He underlined South Africa’s penetration rate at a mere 17.5% of the population.

“The low level of penetration and low speeds means that there is a big gap we are missing in the economy,” Lings said.

In May, Stanlib identified several research reports which concluded that access to the internet plays a positive and significant role in stimulating economic activity.

A 2009, a report by the University of Munich into the relationship between access to broadband Internet and economic growth reached two important conclusions.

Firstly, it found that after introducing Broadband Internet, countries achieved 2.7% to 3.9% higher GDP per person. Secondly, every 10% increase in broadband Internet penetration brings a 0.9% to 1.5% increase in the growth of GDP per person.

Moreover, in 2011, the McKinsey Global Institute researched the Internet’s impact on growth, jobs and prosperity – focusing on 13 countries that account for more than 70% of global GDP.

McKinsey concluded that the Internet has contributed 10% of the countries’ growth over the past 15 years, and 21% of their growth in the past five years. Consequently, the Internet now represents 3.4% of GDP.

Around 53% of this is in the form of consumer spending, while private investment in Internet-related technologies and foreign trade accounts for 31%, with the public sector accounting for the remaining 16%.

“This means that in these countries the internet has a greater share of GDP than agriculture, utilities, communication, education and mining,” Stanlib said.

More on South Africa’s internet

SA internet holding back economic growth

SA Internet population close to 14 million

Broadband speeds: how does SA stack up?

How South Africa is failing at the Internet

SA’s dismal entrepreneurial record

SA business and innovation status

Government failing ICT in SA

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