"Expropriation will be government’s last resort."
This clear and far-reaching statement was made by Deputy Public Works Minister Jeremy Cronin during last year’s heated deliberations over the controversial Expropriation Bill, which still awaits its final destiny.
Following arguments about the exact wording of the bill, one could have assumed that all participants, despite ideological differences and procedural preferences, had come to one conclusion: property rights are fundamental in the context of effectively addressing economic and social inequalities in SA.
The level of existing protection, which is irrevocably tied to the non-conditional possibility of acquiring new property rights, determines the conduciveness of an investment environment.
The latest white paper on ICT, which sketches out the path towards "broadband for all" and the "Internet of Things" tells us something very different. At the core of government’s new policy framework is the wireless wholesale open-access network (WOAN), which will not only house the high-demand spectrum but, in effect, force the existing mobile operators, such as MTN and Vodacom, into a private-public partnership and, ultimately, a monopoly network.
Accordingly, no more exclusive-use spectrum will be licensed to single mobile operators and the existing high-demand spectrum will have to be returned under conditions yet to be disclosed. To illustrate the size of investments in this context, just consider MTN and its plans to invest R12bn in 2016 to improve its infrastructure and expand its coverage.
If implemented, competition will be limited to a differentiation in services only, an aspect many experts believe will negatively affect local innovation and the general appetite in investing in infrastructure. Instead of inviting the spooks of expropriation and nationalisation again, why not devise a more effective wholesale regulation?
There is also the option to grant better access to fibre and mobile networks for mobile virtual network operators (MVNO) that do not own and manage a radio network. Why not subsidise rural infrastructure projects by the proposed Digital Development Fund through an effective private-public partnership instead of throwing the baby out with the bath water?
Richard Majoor, an equity research analyst at Macquarie Group, rightly says, "The fact that spectrum is treated as private property is the precise reason the operators are prepared to make investments, and without such assurances, it would be expected that future investment would cease." Telecommunications infrastructure is widely regarded as a strategic infrastructure asset by investors and any adverse government interventions are immediately judged in the context of the wider strategic infrastructure portfolio.
A strong message demanding less expropriation and more effective use of existing policy instruments will constitute a huge opportunity for government to change investor perceptions to be more positive.
A survey conducted among 2,000 EU investors in SA by the EU Chamber of Commerce at the end of 2016, confirmed that, although 29% of the respondents had negative expectations regarding the general quality and enforcement of investment policies and frameworks in SA, an overwhelming 67% had mixed expectations. Those 67% must still be convinced that strategic infrastructure assets in the country are protected at all times and incentives for additional investments exist today and in the near future.
The universal access and use of the internet and ICT services, with 99% coverage of 2G and 3G since 1993, is a South African success story that should be shared. This achievement should give our government comfort and confidence to continue on its path of facilitating and moderating market forces, rather than replacing them.
• Fuesgen is a policy advisor, management consultant and former senior advisor to the EU Chamber of Commerce in Southern Africa
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.