Aside from what looks like a commercially logical tie-up between Remgro-controlled telecoms-focused private equity outfit Community Investment Ventures Holdings (CIVH) and Vodacom, the R13bn deal has given a ray of hope to millions of people who live in broadband black holes across SA.
Vodacom, a R250bn telecom juggernaut, will pump more than R9bn in cash plus its own fibre-to-the-home assets worth R4bn into a newly created entity made up of the open-access fibre businesses of CIVH, which runs Data Fibre Africa and Vumatel.
In exchange, Vodacom will get at least a 30% stake in the entity called InfraCo, which would instantly be propelled to the upper echelon of the SA internet fibre industry that has been dominated by Telkom.
The deal, which values CIVH at more than R44bn, and is largely welcomed by investors, judging by Vodacom’s positive share price reaction, should be good news for millions of South Africans who have had to rack up crippling bills to stay connected online.
“We expect that Vodacom’s investment will accelerate SA’s fibre reach, network quality and resilience, fostering economic development and help bridge SA’s digital divide in some of the most vulnerable parts of our society,” said CIHV in a statement outlining the reasoning behind the transaction.
“Through Vodacom’s investment, InfraCo would accelerate and expand its lower and middle-income product offering to deliver affordable high-speed broadband access to a broader population segment, including small and medium-sized enterprises.”
You’d be forgiven for being sceptical that the statement is merely a canny public relations tactic that Infraco will devote its attention to taking market share away from players in the already connected upper-class suburbs, and that it would fail to convince shareholders of decent returns in sinking billions of rand into digging up the streets of Soweto or Gugulethu to lay fibreoptic cables.
Yet these townships, ignored by big businesses for a long time as squalid slums created by the racist apartheid government as labour camps, and as places to be feared, have emerged as the next bright growth area for retailers and property developers looking to disrupt and cash in on the vast informal economy long dominated by spaza shops and corner taverns.
It was the construction and the 2007 inauguration of the Maponya Mall that put in sharp relief the enormous and growing influence of SA’s black middle class in the townships where you will find an eclectic mix of shacks, government-subsidised RDP houses and mansions.
The shopping mall, like all others in townships from Umlazi to Soshanguve, reflects this multifaceted mix with more than 200 shops selling everything from Timberland iconic yellow boots workwear that doubled as a luxury streetwear and gourmet food at Woolworths to dresses that cost as little as R69 at Ackermans and a loaf of bread that fetches R5.
The economics of laying down fibre cables in the townships are sound. So are the broader social justice considerations. The importance of access to high-speed broadband internet access became glaringly obvious during the pandemic when millions of people were ordered to stay at home, forcing them to interact with their employers, government and families remotely.
Sure, the latest Stats SA general survey report shows that the proportion of households that have access to the internet is at just over 60%. But almost all of these households have access to the internet via their mobile phones, a very expensive method of getting connected.
Interacting with employers using mobile broadband would undermine the idea behind keeping businesses going when the alternative is to cut jobs or send employees without cheap, reliable high-speed internet on unpaid leave. The reasons for the high cost of mobile internet connectivity are well documented, chief among them the regulatory bottlenecks associated with spectrum allocation.
Vodacom and Remgro have enough commercial reasons to sink billions of rand into the roads of SA’s townships. Shareholders can see that. For consumers in this long overlooked segment of the population, it means more of them would not be on the wrong side of the digital divide.
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