The decline of Denel would compromise South Africa’s strategic independence, says chief restructuring officer (CRO) Riaz Saloojee, making the ... timely disbursal of the R3.4bn ($196m) lifeline thrown to the entity critical.
This is because no Black Business Council of South Africa companies participated in the auction.
“Our members didn’t bid, as they don’t have money to bid,” Kgangi Matabane, the CEO of the Black Business Council of South Africa, tells The Africa Report in an interview from Johannesburg.
“The South African government [has] squandered a serious chance to break the telecoms oligopoly. It’s a shame,” he says.
Vodacom and MTN snapped up the largest slice of the new spectrum – spending more than R5bn ($344m) each at the auction. Vodacom, which has 44.3 million subscribers, has 42% of South Africa’s telecoms share. MTN follows closely with a 31% share of the market.
For a decade, the South African government has dragged its feet in bringing into force policy that reserves a share of the radio frequency spectrum for tech businesses run by Blacks, especially women and youths, says Matabane.
The Wireless Open Access Network (WOAN) was a policy-driven by the South African government to create a central radio spectrum entity. Through the policy, Black entrepreneurs would not need to source huge amounts of capital upfront to build necessary infrastructure from scratch to enter the telecoms market because government support would fill the gap.
We want the market to open so that small players can have a space to play fairly.
Moreover, under WOAN, Vodacom and MTN would have been required to buy 30% of the spectrum to directly support the initiative. Any corporation wanting a licence to get radio spectrum from the WOAN pool would have to be 70% owned by South African citizens and 50% owned by Black South Africans.
“We lobbied very hard for WOAN,” says Matabane. “We want the market to open so that small players can have a space to play fairly.”
South Africa is a country of huge telecoms and internet disparities. Some 7.5 million low-income South Africans, who are overwhelmingly Black, pay 80 times more than middle- to upper-income citizens for surfing the internet.
In June 2020, MTN announced that the company had reached the “significant milestone of Level 1 BBBEE Contributor Status” with the re-alignment of procurement policies and the increased spend with Black-owned vendors was behind the achievement.
In 2018, Vodacom South Africa revealed it had sold up to 6.25% of its equity, the equivalent of R17.5bn to Black players.
“There’s a huge difference between a BEE (Black Economic Empowerment) [law] compliant company and a black-owned company,” says Matabane, who argues that South Africa’s state procurement laws still favour what he categorises as majority white-owned telecoms companies.
The latest radio spectrum was allotted for 20 years and on a technology-neutral basis, MTN, the South Africa telecoms giant, told the local media soon after the auction concluded.
For Black telecoms lobbyists, this makes their exclusion even more alarming. “The failure [of Black owners] to break into the telecoms spectrum is a serious lost opportunity that will never come again in the South Africa ICT sector, as the spectrum is finite,” says Dennis Juru, the president of the South Africa International Cross Border Traders Association, a business lobby that advocates for Black South Africans’ integration into lucrative sectors of the economy.
Bring Black tech players into the auction. They can’t afford the billions of rands required to bid. Exclude them; raise a storm.
Indeed, there’s a danger if aspiring Black telecoms continue to be marginalised from high-priced spectrum bids, says the Black Business Council. “It’s not sustainable; that’s very dangerous,” Matabane says, referencing the racialised economic exclusion that partly fuelled the business-ruining riots of July 2021.
The radio spectrum bid reveals the catch-22 that Black telecom players face in South Africa, says Carter Mavhiza, an independent public accountant in Johannesburg. “Bring Black tech players into the auction. They can’t afford the billions of rands required to bid. Exclude them; raise a storm.”
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