How infrastructure and innovation are building SA’s digital future and powering economic growth

As South Africa’s economy starts to show signs of life after years of contraction and rising unemployment, the country’s digital infrastructure and telecommunications industry could ignite the catalytic growth we need.

Companies in the digital infrastructure and telecommunications sector like Telkom are taking leading roles not only in their own digital transformation as businesses but in the transformation of the broader economy because of the significant impact their technologies and infrastructure have on other sectors.

This phenomenon is well documented globally.

For example, research cited by IDB Invest and NTT Data in Latin America and the Caribbean shows that a 10% increase in broadband connectivity leads to a 3.19% gross domestic product (GDP) increase and a productivity boost of 2.69%. A 10% increase in mobile connectivity contributes to 1.6% GDP growth.

In Sub-Saharan Africa, the adoption of 5G alone is expected to contribute $11 billion to the regional economy by 2030, or 0.37% of GDP. Closer to home South Africa’s digital economy is estimated to contribute up to 20% of the GDP by next year compared to between 8-10% only five years ago.

With the digital economy domestically anticipated to grow by between 10-15% over the next five years compared to 8%-10% in 2020 it is clear that this will be a key factor in bringing our economy back to life and will impact sectors as diverse as commerce, agriculture, finance, health, entertainment and communications.

The growth in e-commerce is illustrative. Over the Covid-19 years e-commerce in South Africa was at the sharp end of rapid and widespread digital transformation in the economy. E-commerce sales, according to WorldWideWorx research, hit a record $4.065 billion in 2023, a 29% increase in 2022.

That kind of growth was enabled by the infrastructure and connectivity created by the telecommunications sector, highlighting how integral this is as the backbone of economic growth.

Through the dark days of the pandemic, this enabled remote working, healthcare technologies and education, the consequences of which continue to be felt in everyday life in South Africa.

Such deep societal impacts place a business like Telkom at the heart of South Africa’s digital future, a responsibility that it takes seriously. As a result, Telkom is a complex business organism which touches South Africa in many ways not always appreciated.

Here are a few examples.

Telkom’s independently verified Economic Impact Assessment shows the company generated R54.9 billion in total economic value, supported over 72,000 jobs, and contributed nearly R40bn in government revenues between 2022 and 2024.

The company’s FutureMakers enterprise development programme alone generated R399m in revenue for participating Small and Medium-sized Enterprises (SMEs), created 69,500 jobs and impacted nearly 230,000 lives. More than 2500 previously disadvantaged SMEs received training.

The Telkom Foundation has been instrumental in bringing an e-learning platform to Ga-Maake Village in Limpopo offering data zero-rated maths and science lessons among others to Grade 12 learners there.

In another example, Telkom partnered with EasyEquities to democratise access to financial markets for people wanting to invest with as little as R5.

While Telkom leads in infrastructure scope and service diversity, particularly in ensuring connectivity in remote rural areas, other telecommunications companies are also contributing to economic growth through their own digital transformation initiatives.

The GSMA report “Digital Economy of South Africa” released in November shows that South African mobile network operators spend $28 per capita on physical infrastructure, the highest among Brics nations.

However, we are only at the start of what is possible with an estimate in 2023 that only 22% of telecoms companies in South Africa had successfully executed digital transformation initiatives. Although SA’s per capita telecommunications infrastructure is so high we still lag Brics countries except for Russia on 5G coverage.

But the examples do show how fundamental and externally consequential internal digital transformation efforts can be to the broader economy when the sector you operate in has such a broad, enabling effect.

Today, some 75% of South African households have internet access and 97% have at least one mobile phone which lays the foundation for the digitally-led economic growth, which is anticipated, especially when other barriers, like the cost of 5G handsets, begin to fall.

The government’s Digital Economy Master Plan and the SA Connect initiative, when fully realised, could add tens of thousands of government buildings to broadband connectivity alongside millions more households. This will add momentum to South Africa’s digital transformation, which is largely driven by the private sector.

The scale of digital transformation required to unlock South Africa’s economic potential is immense, but the foundations are already in place with major telecommunications companies having invested over R11.45 billion (Telkom invested more than R6 billion on its own over the last year) in fibre networks and data centres alone over the past five years.

What’s particularly encouraging is how this digital infrastructure is enabling transformation across many sectors of society. Equally encouraging is how Telkom drives sustainable growth and returns for investors while also enabling the digital future of the society we serve.

Simo Mkhize is Telkom Group’s Chief Commercial Officer and a panellist who discussed the GSMA’s economic growth and digital transformation report on its release on 11 November 2024.