Uncertainty in South Africa costing billions

 ·7 Apr 2014

The Independent Communications Authority of South Africa (Icasa) has a role to play in setting out the path and sticking to it, according to Mike Schüssler, chief economist at Economists.co.za.

The South Gauteng High Court last Monday (31 March) ruled that new call termination regulations issued by the Independent Communications Authority of South Africa (Icasa) are “unlawful and invalid”.

However, the declaration of invalidity has been suspended for 6 months, which means that that the new call termination rates kicked in on Tuesday, 1 April 2014, as planned, but Icasa has been given six months within which to review them.

Among other things, the current regulations cut mobile termination rates (MTRs) to 20 cents per minute, while allowing asymmetry of up to 44 cents per minute.

Under the ruling, for the next 6 months Cell C and Telkom Mobile will be allowed to charge Vodacom and MTN significantly more to place to calls to their networks than Vodacom and MTN can charge them.

Icasa wants to implement a set of regulations that will see these rates drop to 10 cents a minute in 2016.

According to Schüssler, South Africa is already struggling with certainty for economic role players. “Laws and regulations get changed and strikes etc happened often without permission. What the economy needs more than anything is certainty,” he said.

“That does not mean no change, but a clear path that is defined and not changed every time,” the economist said.

“Remember, the customers of the sector are also often businesses and they want to be able to control their costs and get better quality. So Icasa has a role to play in setting out the path and sticking to it.”

He said that one telecoms provider losing out and another wining will add cost savings for a short time to many millions, while greater competition will also be a good thing.

“But more importantly is the certainty that everyone craves for. So, perhaps the route needs to be set now and no one should go off the route that is set for say three to five years,” Schüssler said.

“The route must lead to more competition and better services for our major economic hubs,” he said.

South Africa would create a bigger economy by a few percent through better internet speeds, low call rates, and better connectivity.

“Each percent of the economy is about R36 billion today; so, while one case, or a few companies charging a little more, is small in the bigger picture, I think I will agree that the long term effects are anything between say R36 billion to say R180 billion,” Schüssler said.

He stressed, though, that this number would be as a result of the industry’s lack of competition stretching back more than a decade.

He added that all countries struggle and are behind the technology curve, “so probably at best we could have hoped for say a R90 billion bigger economy given that we have improved as have other countries, but just not as much.”

More on South Africa

MTN, Vodacom call termination case: court rules

The economic impact of violence in South Africa

The truth about corruption in South Africa

Is South Africa a failed country?

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