DON'T MISS : Talking Africa New Podcast – Nigeria’s Tijjani Muhammad-Bande: tough time to be a diplomat

South Africa: Vast Networks’ fall signals new digital divide

By David Whitehouse
Posted on Monday, 28 October 2019 09:43

Handsets are the new markers of social mobility in Africa. REUTERS/Mohamed Nureldin Abdallah

This month’s bankruptcy of South Africa’s largest Wi-Fi provider, Vast Networks, is a blow for digital democratisation. Who is brave enough to fill the vacuum?

Vast Networks was started in 2015 to provide open-access Wi-Fi network infrastructure in South Africa.

Its majority owner was MultiChoice, spun off from Naspers earlier this year, with Dimension Data also holding a stake. The company is entering liquidation after 18 months of searching for a buyer.

For South Africa’s upper market segments there is “still a need for a seamless international network of Wi-Fi hotspots,” says Russell Southwood, CEO of Balancing Act, an Africa-focused telecoms consultancy in London. “But at the lower end of the market there will be different mass-market models and these will be much tougher to operate.”

  • Wi-Fi companies make money through charging for access, selling on data about their users for advertising use, or by selling advertising directly themselves. But advertising revenues, Southwood notes, have “not yet really taken off anywhere in sub-Saharan Africa.”

In the short term, that means more market segmentation and higher prices will be needed to make Wi-Fi provision pay.

  • According to Pew Research, South Africa, at 59%, is the only country in sub-Saharan Africa where at least half the population is online.
  • But people are only likely to be able to move beyond the most basic functions if they own a smartphone.
  • This, Pew Research says, suggests “the emergence of a new digital divide based on phone type”.

Patience needed

Mobile data costs in the competitive South African market do little to support short-term business models.

According to Ecobank, 1 gigabyte of data in South Africa costs 0.9% of the average monthly income, making it the fifth cheapest in sub-Saharan Africa and well below the African average of 4.1%.

Wi-Fi is becoming a “commoditised product, and pricing pressure implies that operators need volume growth to remain relevant,” says Mish-al Emeran, an analyst at Electus Fund Managers in Cape Town.

  • “It should be possible to have a profitable model in South Africa,” Emeran says.
  • But “a key mistake many players in the tech space make is that they overestimate demand, which usually does come through, but takes much longer than original expectations”.
  • Naspers, notes Southwood, has “a long history of exiting if there are not fairly immediate returns”.

Yet, for developing countries the economic benefits of Wi-Fi are critical.

  • Wi-Fi should be recognised as a key economic driver and governments should develop incentives to stimulate its growth, argue Raul Katz and Fernando Callorda in a paper published by Telecom Advisory Services.
  • In rural areas, Wi-Fi’s contribution to GDP arises through the creation of new businesses, raising agricultural productivity and lifting household incomes, the report says.
  • Steps that governments can take to strengthen Wi-Fi provision include assigning enough spectrum to avoid congestion, and promoting start-ups, the paper argues.

Bottom line: Without a financially viable model for open-source Wi-Fi provision the gap between the digital haves and the have-nots will only widen.

We value your privacy

The Africa Report uses cookies to provide you with a quality user experience, measure audience, and provide you with personalized advertising. By continuing on The Africa Report, you agree to the use of cookies under the terms of our privacy policy.
You can change your preferences at any time.