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Internet access in South Africa has many divides

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The latest study on Internet access in South Africa reveals extensive fault lines across geography, race and income, writes ARTHUR GOLDSTUCK, one of the authors of the report.

The digital divide is a convenient way of describing the gap between the haves and have-nots in the world of technology and communications. But it goes far beyond mere affordability.

The new Internet Access in South Africa 2017 report, released last week by World Wide Worx with the support of wholesale connectivity providers Dark Fibre Africa, spells out the many divides that make up the dramatic imbalances in Internet access.

The good news is that the South African Internet user population passed the 20-million mark for the first time last year, reaching 21-million, and is expected to grow to at least 22.5-million in 2017. This means that more than half of the adult population is now connected.

The bad news lies on the flip side of that same coin.

“It means that half are not connected, highlighting how far we still have to go to bring everyone into the information economy,” says Reshaad Sha, Chief Strategy Officer and executive director of Dark Fibre Africa. “If we are to deliver a truly digitally inclusive state, increasing the ability of people to afford internet connectivity is absolutely critical, as this remains an inhibitor to the majority of people in the lower income brackets isolated from the benefits of the information economy.”

The report includes data supplied from the Target Group Index (TGI) survey conducted by Ask Afrika, one of the largest market research organisations on the continent. TGI comprises more than 15 000 interviews across a vast range of consumer topics and behaviours.

The analysis of this data reveals that, among adult South Africans earning more than R30 000 a month, Internet penetration is at 82.4 per cent, on a par with overall penetration in many industrialised countries. However, penetration declines rapidly as income declines, falling to 61.3 per cent for those earning between R14 000 and R18 000, 42 per cent for those earning between R3 000 and R6 000, and below 30 per cent for those earning below R2 500 a month.

This is merely the most obvious divide, as one would expect access to be associated with income levels. However, it highlights the extent to which lower income South Africans are frozen out of the Internet economy.

The research shows that a third of adult Internet users rely on their cellphones as their primary means of access. For low-income users, Internet access requires data costs to be taken off airtime, and those costs remain among the highest in the world.

High-income individuals tend to buy data in large bundles, which brings the cost down dramatically, to the extent that their data costs compare with some of the lowest in the world. However, this obscures the high cost of data for the rest of the population.

Education is also a barrier to Internet access, with less than 20 per cent access among all segments that have below Grade 7 education. Fewer than 40 per cent of those with less than a Grade 11 education have Internet access, but it rises rapidly after that: with a maximum Grade 11 education, it goes up to 48.7 per cent, Grade 12 goes to 55 per cent, and of those with a post-matric qualification, it reaches a high 71.6 per cent.

A digital divide also exists between major metros and non-metro areas, and between different cities and provinces. The Western Cape has by far the highest Internet penetration of all provinces, at 75 per cent, followed distantly by Gauteng at 55%. This is believed to reflect the extensive local initiatives in towns like Stellenbosch and Somerset West to increase coverage, as well as an earlier start on provincial connectivity initiatives.

“It might seem like it is stating the obvious, but the other major area that needs work is that of infrastructure,” Sha point out. “The report indicates that a vast digital divide exists between the major metropolitan areas and the smaller cities and towns.

“The former have penetration levels of 67.7%, compared to the latter’s 32.3% penetration. Even more concerning, these figures only reflect the gap between large cities and smaller towns. It can certainly be assumed that, outside of the urban areas, Internet penetration is significantly lower.

“Therefore, when infrastructure projects are planned in the future,  sustainable models, partnerships and policies must be explored to support such projects.”

Unfortunately, says Sha, when one looks at Internet penetration among the various races, it is also clear that South Africa a long way to go to overcome the inequalities of the past.

“Over two thirds of white people have Internet access (69.1%), compared to just 47.7% of black, 48.1% of Indian, and 45,8% of Coloured users. Perhaps the most effective way of increasing Internet penetration is to improve economic inclusivity across the board. “

The more people that can afford devices and connectivity, he says, the easier it will be to drive penetration.

“This is vital as, with Africa the continent that has the largest population of youth in the world, Internet penetration has never been more critical if we want our youth to be able to play a role in the economy.”

  • Arthur Goldstuck is founder of World Wide Worx and editor-in-chief of Gadget.co.za. Follow him on Twitter and Instagram on @art2gee

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VoD cuts the cord in SA

Some 20% of South Africans who sign up for a subscription video on demand (SVOD) service such as Netflix or Showmax do so with the intention of cancelling their pay television subscription.

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That’s according to GfK’s international ViewScape survey*, which this year covers Africa (South Africa, Kenya and Nigeria) for the first time.

The study—which surveyed 1,250 people representative of urban South African adults with Internet access—shows that 90% of the country’s online adults today use at least one online video service and that just over half are paying to view digital online content. The average user spends around 7 hours and two minutes a day consuming video content, with broadcast television accounting for just 42% of the time South Africans spend in front of a screen.

Consumers in South Africa spend nearly as much of their daily viewing time – 39% of the total – watching free digital video sources such as YouTube and Facebook as they do on linear television. People aged 18 to 24 years spend more than eight hours a day watching video content as they tend to spend more time with free digital video than people above their age.

Says Benjamin Ballensiefen, managing director for Sub Sahara Africa at GfK: “The media industry is experiencing a revolution as digital platforms transform viewers’ video consumption behaviour. The GfK ViewScape study is one of the first to not only examine broadcast television consumption in Kenya, Nigeria and South Africa, but also to quantify how linear and online forms of content distribution fit together in the dynamic world of video consumption.”

The study finds that just over a third of South African adults are using streaming video on demand (SVOD) services, with only 16% of SVOD users subscribing to multiple services. Around 23% use per-pay-view platforms such as DSTV Box Office, while about 10% download pirated content from the Internet. Around 82% still sometimes watch content on disc-based media.

“Linear and non-linear television both play significant roles in South Africa’s video landscape, though disruption from digital players poses a growing threat to the incumbents,” says Molemo Moahloli, general manager for media research & regional business development at GfK Sub Sahara Africa. “Among most demographics, usage of paid online content is incremental to consumption of linear television, but there are signs that younger consumers are beginning to substitute SVOD for pay-television subscriptions.”

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New data rules raise business trust challenges

When the General Data Protection Regulation comes into effect on May 25th, financial services firms will face a new potential threat to their on-going challenges with building strong customer relationships, writes DARREL ORSMOND, Financial Services Industry Head at SAP Africa.

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The regulation – dubbed GDPR for short – is aimed at giving European citizens control back over their personal data. Any firm that creates, stores, manages or transfers personal information of an EU citizen can be held liable under the new regulation. Non-compliance is not an option: the fines are steep, with a maximum penalty of €20-million – or nearly R300-million – for transgressors.

GDPR marks a step toward improved individual rights over large corporates and states that prevents the latter from using and abusing personal information at their discretion. Considering the prevailing trust deficit – one global EY survey found that 60% of global consumers worry about hacking of bank accounts or bank cards, and 58% worry about the amount of personal and private data organisations have about them – the new regulation comes at an opportune time. But it is almost certain to cause disruption to normal business practices when implemented, and therein lies both a threat and an opportunity.

The fundamentals of trust

GDPR is set to tamper with two fundamental factors that can have a detrimental effect on the implicit trust between financial services providers and their customers: firstly, customers will suddenly be challenged to validate that what they thought companies were already doing – storing and managing their personal data in a manner that is respectful of their privacy – is actually happening. Secondly, the outbreak of stories relating to companies mistreating customer data or exposing customers due to security breaches will increase the chances that customers now seek tangible reassurance from their providers that their data is stored correctly.

The recent news of Facebook’s indiscriminate sharing of 50 million of its members’ personal data to an outside firm has not only led to public outcry but could cost the company $2-trillion in fines should the Federal Trade Commission choose to pursue the matter to its fullest extent. The matter of trust also extends beyond personal data: in EY’s 2016 Global Consumer Banking Survey, less than a third of respondents had complete trust that their banks were being transparent about fees and charges.

This is forcing companies to reconsider their role in building and maintaining trust with its customers. In any customer relationship, much is done based on implicit trust. A personal banking customer will enjoy a measure of familiarity that often provides them with some latitude – for example when applying for access to a new service or an overdraft facility – that can save them a lot of time and energy. Under GDPR and South Africa’s POPI act, this process is drastically complicated: banks may now be obliged to obtain permission to share customer data between different business units (for example because they are part of different legal entities and have not expressly received permission). A customer may now allow banks to use their personal data in risk scoring models, but prevent them from determining whether they qualify for private banking services.

What used to happen naturally within standard banking processes may be suddenly constrained by regulation, directly affecting the bank’s relationship with its customers, as well as its ability to upsell to existing customers.

The risk of compliance

Are we moving to an overly bureaucratic world where even the simplest action is subject to a string of onerous processes? Compliance officers are already embedded within every function in a typical financial services institution, as well as at management level. Often the reporting of risk processes sits outside formal line functions and end up going straight to the board. This can have a stifling effect on innovation, with potentially negative consequences for customer service.

A typical banking environment is already creaking under the weight of close to 100 acts, which makes it difficult to take the calculated risks needed to develop and launch innovative new banking products. Entire new industries could now emerge, focusing purely on the matter of compliance and associated litigation. GDPR already requires the services of Data Protection Officers, but the growing complexity of regulatory compliance could add a swathe of new job functions and disciplines. None of this points to the type of innovation that the modern titans of business are renowned for.

A three-step plan of action

So how must banks and other financial services firms respond? I would argue there are three main elements to successfully navigating the immediate impact of the new regulations:

Firstly, ensuring that the technologies you use to secure, manage and store personal data is sufficiently robust. Modern financial services providers have a wealth of customer data at their disposal, including unstructured data from non-traditional sources such as social media. The tools they use to process and safeguard this data needs to be able to withstand the threats posed by potential data breaches and malicious attacks.

Secondly, rethinking the core organisational processes governing their interactions with customers. This includes the internal measures for setting terms and conditions, how customers are informed of their intention to use their data, and how risk is assessed. A customer applying for medical insurance will disclose deeply personal information about themselves to the insurance provider: it is imperative the insurer provides reassurance that the customer’s data will be treated respectfully and with discretion and with their express permission.

Thirdly, financial services firms need to define a core set of principles for how they treat customers and what constitutes fair treatment. This should be an extension of a broader organisational focus on treating customers fairly, and can go some way to repairing the trust deficit between the financial services industry and the customers they serve.

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