Beware of forcing pricing on business

Many were cheering following the announcement that the Competition Commission had hit cellphone networks Vodacom and MTN hard on data.

The companies have been given two months to reduce their high data prices. If they don’t, they face legal action. Also, they must come up with a plan to provide free data packages for all customers.

The news would have sparked cheers because cellular operators in this country are frequently accused of gouging their customers – and nowhere is this more in evidence than the fact that South Africans pay data prices which are much higher than the rest of Africa. In some instances, customers of Vodacom and MTN elsewhere on the continent pay fractions of what we do.

At the same time, the annual reports of both companies record not only massive profits but also profit margins which are higher than in most other industries.

So, justice has been served?

Well, not quite. Despite the populist appeal of attacking the digital “fat cats”, there are a number of worrying aspects to this latest communication technology development.

First, prescribing to private business the rate at which it can sell its products is the mark of a command economy – or, in crude terms, socialism or communism. Even more so, ordering private companies to give away their products for free – as the commission has done – is ominous.

Apart from the fact that many other businesses will be asking “Are we next?”, this sort of interference is exactly what investors – and it doesn’t matter whether they are local or foreign – don’t want to see.

Undoubtedly our cellular networks have been milking their customers – but, to use another farmyard metaphor, let’s beware we don’t kill the goose that lays the golden tax eggs (and jobs) in the name of populism.

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