South Africa - Internet And Cellphone

South Africa - A dual economy: legacy of apartheid

South Africa, largest economy on the African continent and 27th largest in the world has, however, an economy marked by duality, with a sophisticated financial and industrial market having developed alongside an underdeveloped informal economy.

It has a productive and industrialized market that exhibits many characteristics associated with developing countries, including a division of labor between formal and informal sectors, uneven distribution of wealth and income and a high unemployment rate. These major challenges faced by South Africa are mainly due to the repression regime of the apartheid era. The legacy of this period still has a major impact on today’s economy.

Despite the progress made since the end of apartheid and the attempt of the democratic government to remove all forms of discriminatory legislation, the ramifications of ignorance and poverty are still remaining. The unemployment rate in South Africa, close to 40%, remains one of the highest in the world. Although the South African government publishes an official rate of 25.5%, it excludes the discouraged work seekers.

Major obstacle: low penetration of fixed line telephony and Internet

While the domestic telecommunications infrastructure provides modern and efficient service to urban areas, there is a definite need of expansion into the rural areas of the country, where most previously disadvantaged people live.

This lack of telecommunications infrastructure is mostly due to the failure of South Africa’s single fixed-line operator, Telkom, to widen access and lower telecommunication costs to its nation. Over the years, Telkom, of which the government is the major shareholder, barely increased the number of new telephone lines and imposed high prices for installation and per call charges.

Furthermore, the expensive operating environment created by Telkom, dominant actor in the fixed-line and bandwidth market, caused South Africa’s internet sector to be stagnant. Since the introduction of ADSL Telkom, in 2002, there has been a significant rise in broadband usage in South Africa but no major impact on the overall connectivity numbers. Most users have migrated up the connectivity from dial-up to broadband. The high costs associated to local calls and line rental remain a major