PRESENTATION TO THE PORTFOLIO COMMITTEE ON TELECOMMUNICATIONS & POSTAL SERVICES

1. PRESENTATION TO THE PORTFOLIO COMMITTEE ON TELECOMMUNICATIONS & POSTAL SERVICES Briefing on Cost to Communicate and ICT SMME Development Strategy Implementation Mr. Robert Nkuna (Director-General) 13 March 2018

2. Team DTPS • Mr. Robert Nkuna, Director-General • Ms. Mameetse Masemola, ADDG: ICT Policy Development Branch • Ms. Adelaide Masemola, Acting CD: Economic Analysis • Ms. Tsholofelo Mooketsi, Chief Director: ICT Strategy

3. DTPS ORGANISATIONAL MANDATE

4. PROGRAMME TO REDUCE COST TO COMMUNICATE

5. Context - the Mandate for ICT facilitated development of South Africans

6. Context- the Mandate for ICT facilitated development of South Africans National Development Plan • The National Development Plan 2030 recognises that inclusive economic growth in South Africa is critical for addressing inequality. Therefore increased access to communications technologies, in particular broadband, the services and content carried on ICT networks is an important means of promoting growth. Medium-Term Strategic Framework • The Medium-Term Strategic Framework identifies the high domestic cost of broadband internet connectivity as a major hindrance to socio-economic development in the country. SA Connect • The national Broadband Policy highlights that one of the primary factors hampering the country’s competitiveness is the high prices charged for communications services. National Integrated ICT Policy White Paper • The White Paper articulates the need to address the high cost to communicate that inhibits the ubiquitous utilisation of ICTs. The entire policy framework is geared towards achieving universal service and access to all ICT infrastructure and services for all South Africans regardless of who they are, where they live, their social and economic status.

7. COST TO COMMUNICATE PROGRAMME OF ACTION POLICY AND REGULATORY INTERVENTIONS (1) ICT SMME DEVELOPMENT Open Access Policy DEMAND SIDE MEASURES SUPPLY-SIDE MEASURES Radio Frequency Spectrum National e-Government Strategy and Roadmap National e-Strategy Rapid Deployment Policy

8. COST TO COMMUNICATE PROGRAMME OF ACTION POLICY AND REGULATORY INTERVENTIONS (2) Policy Direction on Effective Competition in broadband markets (March 2016) Competition Commission’s Data Services Market Inquiry ICASA’s Priority Market Study MINISTERIAL POLICY DIRECTIONS AND REGULATIONS KEY INTERVENTIONS Annual Publication of SA ICT Sector Performance End-User and Subscriber Charter Regulations (amendments) Policy Direction on Price Transparency (September 2014) Review of Call Terminations Regulations of 2014

9. STATUS UPDATE ON KEY INTERVENTIONS TO REDUCE COSTS OF COMMUNICATIONS

10. STATUS UPDATE ON KEY INTERVENTIONS TO REDUCE COSTS OF COMMUNICATIONS

11. STATUS UPDATE ON KEY INTERVENTIONS TO REDUCE COSTS OF COMMUNICATIONS 11

12. STATUS UPDATE ON KEY INTERVENTIONS TO REDUCE COSTS OF COMMUNICATIONS 12

13. STATUS UPDATE ON DATA TARIFFS (1) IN –BUNDLE RATE PER MEGABYTE FOR PREPAID DATA PACKAGES • Consumers buying large volumes of data benefit significantly from low in-bundle rates/MB. • Out-of-bundle rates are substantially higher than in-bundle rates. • Out-of-bundle rates/MB >50% than the in-bundle rates/MB. OUT OF BUNDLE PER MEGABYTE FOR PREPAID DATA PACKAGES Source: ICASA database based on tariff notifications

14. UPDATE ON DATA TARIFFS (2) Source: ICASA database based on tariff notifications • MTN announced that “..it will be reducing its out-of-bundle (OOB) pricing to stimulate usage..” • Vodacom reduced its OOB rate from R2/MB to R0.99/MB for prepaid data and R0.89/MB  for hybrid (top-up) data bundles. • Cell C reduced its OOB rate for its 66c tariff plan from 0.66c to 0.15c. However this is specifically for this tariff plan and not all prepaid tariff plans.   • It has also been reported that Cell C has revised its data expiry rules (e.g. from 20 September 2017 customers were allowed to extend the validity of their data bundles indefinitely by simply purchasing another data bundle before the current one expires).

15. UPDATE ON DATA TARIFFS (2) • Source: WAPA, ECA Bill hearings, March 2018

16. INTERNATIONAL BENCHMARKING • Most global ICT rankings use the following indices to measure how countries leverage ICTs to promote socio-economic development. • DRIVERS IMPACT • Global IT Report 2016 (World Economic Forum) showed that South Africa moved 10 places up and is ranked 65 out of 139 countries. • International Telecommunication Union –ICT Development Index ranks South Africa 88 out of 175 countries. • South Africa performs well in terms of policy and regulatory environment and business innovation but performs relatively poorly on access, affordability and skills. Environment Readiness Infrastructure Affordability Skills Usage Individual Business Government ECONOMIC SOCIAL

17. REGIONAL RANKING • Research by ICT Africa shows that: • South Africa currently ranked 13th out of the 49 African countries. • Egypt continues to charge a fraction (less than 33%) of what the cheapest OECD basket costs in South Africa. • Two SADC countries perform better than SA in this measure: Madagascar (USD 3.4) and Mauritius (USD 3.3)

18. ICT SECTOR OVERVIEW • Voice dominant revenue driver but declining due to exponential growth in data. • In terms of the tariff filings by operators to ICASA**: • Vodacom: data revenue increased by 17.94% and voice revenue declined by 2.9%. • MTN: data revenue increased by 31.4%. • Cell C: Data revenue increased by 35% and voice revenue declined by 2%. • Voice tariffs have decreased significantly since ICASA’s intervention in the Wholesale Call Termination market 2010. • Growth in data usage is driven in the main by over the top (OTT) services and content. • Smartphone and tablet penetration is growing at a rate of 30% per annum. • Out-of-bundle rate per MB still high relative to in-bundle rates. • **source ICASA

19. IMPLEMENTATION OF THE ICT SMME DEVELOPMENT STRATEGY

20. ICT SMME DEVELOPMENT STRATEGY • The ICT SMME Development Strategy seeks to promote inclusive economic growth and contribute to employment creation. • The Strategy thus focuses on: • Transforming the ICT sector through accelerating the development and growth of small enterprises; • Creating support mechanisms to increase the levels of uptake and usage of ICT services by all SMMEs in various sectors of the economy; • Establish a coordinated and integrated planning mechanisms for development of ICT SMMEs.

21. ICT SMME DEVELOPMENT STRATEGY: IMPLEMENTATION APPROACH • Multi-stakeholder implementation approach: Executing and delivering on targets set forth in the Strategy requires collaborations and partnerships between government, private sector, academia and community based organisations • This is also ideal, considering the economic conditions and limited resources available within government • Therefore, the DTPS has adopted an ICT Sector-wide integrated planning, implementation and reporting approach, that involves all relevant stakeholders • DTPS will lead certain interventions and implement other interventions through partnerships with stakeholders. • The Department has thus far, engaged approximately 50 stakeholders, requesting them to forward through their 3 year SMME Development plans, aligned to the objectives of the ICT SMME Development Strategy. • Strategy will be implemented over a 3-year period: 2018 – 2020. Partnership Through Collaboration

22. ICT SMME DEVELOPMENT STRATEGY: IMPLEMENTATION APPROACH DTPS with SOCs DTPS-led Projects IMPLEMENTATION APPROACH DTPS with Other GovtsDepts and SoCs DTPS with Private Sector

23. Model to underpin the Implementation of the ICT SMME Development Strategy Interventions required in four critical areas in order to make high impact

24. ICT SMME Development Strategy Implementation PlanDTPS-led interventions

25. ICT SMME Development Strategy Implementation PlanDTPS-led interventions

26. APP TARGETS: 2018/2019

27. APP TARGETS: 2018/2019

28. APP TARGETS: 2018/2019

29. STRATEGIC INTERVENTIONS

30. STRATEGIC INTERVENTIONS

31. STRATEGIC INTERVENTIONS

32. STRATEGIC INTERVENTIONS

33. STRATEGIC INTERVENTIONS

34. STRATEGIC INTERVENTIONS

35. STRATEGIC INTERVENTIONS

36. STRATEGIC INTERVENTIONS

37. STRATEGIC INTERVENTIONS

38. Partnerships with DTPS SOCs to support the development of ICT SMMEs SITA - 30% Set-Aside for tenders below R30 million and mandatory subcontracting of SMMEs for all tenders above R50 million ZACR- implementation of interventions to attract black Registrars Leveraging Procurement Spent to support /market access Enterprise Supplier Development Programmes .zaDNA training on Domain Name Systems & related skills to enable establishment of ISPs NEMISA – SMME Skills development in relevant technical and basic literacy skills to increase uptake and usage of ICTs by SMMEs across economic sectors BBI – ICT SMMEs to be allocated OEM installations; Increase participation of QSEs & ENE in the ICT sector through targeted procurement; SMME Invoices paid within 30 days SITA- establishment of ICT Labs across all provinces. First one launched in the Free State in partnerships with the Free State Economic Development Agency Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

39. Partnerships with DTPS SOCs to support the development of ICT SMMEs Sentech – Development and implementation of a socio-economic transformation & BEE Strategy; Providing both financial & non-financial support to qualifying SMMEs; Skills development/training to focus on core ICT skills; Increase preferential procurement for black owned and managed ICT SMMEs USAASA -Collaborate with DTPS on the development of a costed transition plan from USAASA/USAF to the Digital Development Fund (DDF). Fund to also support ICT SMMEs; Increased procurement from ICT SMMEs in the roll-out of projects and programmes (including infrastructure) Leveraging Procurement Spent to support market access Enterprise Supplier Development Programmes & market extension Post Office -E-Commerce platform development in collaboration with the Department to extend market access by SMMEs Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

40. PARTNERSHIPS WITH OTHER GOVERNMENT DEPARTMENTS AND THEIR PORTFOLIO ORGANISATIONS TO SUPPORT ICT SMMEs The dti – ICT SMMEs benefiting from the Black Industrialist Programme through support and incentives for local manufacturing; CIPC – addressing Intellectual Property challenges faced by ICT SMMEs NEF-Funding ICT SMMEs (spent R214 since inception). ICT SMME to benefit from implementation of a Master Systems Plan Leveraging on Financial & Non-Financial Support for Sustainability of SMMEs Leveraging on Financial and Non-Financial Support for sustainability of SMMEs Sefa -provides financial products and services to qualifying ICT SMME's and Co-operatives (Direct & Wholesale lending) SEDA – Provision of non-financial support to ICT SMMEs such as: business and financial management skills, project management skills, etc. EDD – Implementation of SMME skills development programs to increase uptake and usage of ICTs by rural enterprises (e.g., targeted Eastern Cape & Mpumalanga Municipalities) Soft-Start Business Incubation- Incubating ICT SMMEs, thus enhancing their viability, mentoring services, Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

41. PARTNERSHIPS WITH PRIVATE SECTOR COMPANIES TO SUPPORT ICT SMMEs VODACOM- Procurement from SMMEs (spent R3,6 billion -2017/18); Market expansion through the Vodacom SMME Portal; Retail Transformation (54 Stores in the next 4 years); Mentoring & nurturing ICT SMMEs into fully-fledged Tower companies; Roll-out of FTTx through ICT SMMEs; JSE Top SME Fund –Vodacom made R4 million contribution to date. HUAWEI – Donated ICT equipment to the value of R6 million to qualifying SMMEs; On-site assistance on compliance issues (Health & Safety); Training subcontractor employees on FTTx & ISDP; Shorter payment terms for ICT SMMEs Leveraging on Private sector investment to ensure Sustainability of SMMEs Leveraging on private sector investment to for development ICT SMMEs (capacity development & market opportunities) MTN – Implementation of Enterprise Supplier Development programme & roll-out of MTN Zoners Riversands Incubation Hubs – Provides subsidized rental offices/space to ICT SMMEs (200 black owned businesses); Training of ICT SMMEs provided through Online Platform; Business support services (e.g., cloud based accounting), market linkages. TELKOM – FutureMarkers programme (R400 million budget) – Women & youth owned SMMEs main beneficiaries; R150 million has been invested to the FutureMakers Fund; 3 Hubs providing affordable connectivity to 800 tech businesses; Procurement from SMMEs Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

42. Partnerships with Academia to enhance the viability of ICT SMMEs DST & University of the Western Cape – Partnership to accelerate the growth and sustainability of the Zenzeleni ICT Cooperative based in the Mankosi in the Eastern Cape. Johannesburg Centre for Software Engineering (JCSE) – Partnership to undertake research with the aim to identify opportunities for ICT SMME Development along the ICT Sector Value Chain. Leveraging on academic research to accelerate growth & development of ICT SMMEs and cooperatives Department of Higher Education – Explore Partnerships to accredit specific training programmes to support the skilling of SMMEs . Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

43. Institutional Mechanism for Strategy implementation National ICT Forum chaired by the Minister (meets annually) Chairpersons’ Meeting chaired by the DG (meets twice a year) Governance & Security Chamber Economic Chamber Social Chamber ICT SMME Development Sub-Committee Inter-Departmental Working Committee on SMME & Cooperatives Development chaired by DSBD Director-General(meets quarterly)

44. CONCLUSION • Implementation of the ICT SMME Development Strategy is partnership and collaboration with the private sector, DTPS SOCs, other government Departments, NHI sites municipalities, Development Finance Institutions (DFIs), international bodies such as the ITU and other entities of government, such as SEDA. • Effective monitoring and evaluation of activities in the ICT SMME Sector critical to ensure targeted interventions both at policy and programme interventions. Department will continue updating the ICT SMME Database and finalising a single portal for ICT SMMEs as well as produce of a Sector-Wide Annual report stemming from the collation and measurement of ICT SMMEs in the country.

45. Thank you… Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development