by Nicholas Woode-Smith

In ICT, the government does best when it governs least

The fast changing world requires us to change fast


The world is heading towards the future and South Africa needs to make sure it isn’t left behind. The Fourth Industrial Revolution is and will dramatically change the way we do business. As commodity prices continue to plummet, SA’s economy needs to shift away from the already flagging mining sector and put more stock into the information and communication technologies (ICT) industry and general technological development.

According to Stats SA, ICT in SA is currently larger than agriculture in terms of economic production. This is despite the fact that more people work in the agricultural sector. While ICT is skill-intensive, it can be a lot more rewarding than other industries, as it supports and develops all other industries. If done right, ICT may be able to circumvent the need for non-existent capital that pervades so many other industries.

It is undeniable that SA needs to embrace the ICT industry as an outlet for skilled labour and sustainable economic production. The question is: how can we achieve this and what role does the government have to play?

Despite what some pundits would have one believe, the answer to that question may be for the government to do less rather than more.

Trade deficit

Currently, SA’s ICT imports supersede its exports, causing a trade deficit. This is because South Africa relies on importing ICT equipment, such as computers, radios and smartphones, from overseas. This is unavoidable. South Africa’s manufacturing sector won’t be able to produce as effective technology for cheaper, at least not for the foreseeable future.

Rather, this trade deficit should be addressed through finding ways of cheapening the price of import (through the removal of tariffs) and through raising the local economic production of the ICT industry. If every ICT professional costs a certain amount in import expenditure to function, then we just need to find a way to increase their profitability to reduce the trade deficit.

Protectionism, as in halting the import of ICT goods, will only damage the industry. Free trade will lessen the cost burden and help the industry grow. The government needs to work on increasing free trade policies, at least where ICT is involved.

In terms of increasing profitability, this will be a general theme for the article.

Skill development

ICT is highly skill-intensive but that doesn’t mean it has to be capital-intensive. Many programmers are self-taught from online courses—free online courses. For more intensive courses, private colleges are already filling the gap and churning out many trained ICT professionals. This reveals something that policymakers must keep in mind. The most successful initiatives are for-profit—while public and non-profit initiatives tend to fail. This is because of the profit incentive.

If the goal is to make money, then the process needs to be money-making. Policy-wise: the government should support these private tech colleges through deregulation and instilling a culture in public schools that students should consider going to them.

Too many students are flocking to do uneconomical degrees at university when ICT colleges could provide them with much more marketable skills.

Current and upcoming government policy

The government is currently working through the ICT Policy Green Paper. The aim of the paper is, allegedly, to improve the lives of South Africans through increasing consumer access to ICT. A part of the paper, among other stipulations, is for ICT enterprises that hold a government-sanctioned license to aid the government’s ICT objectives.

This paper is very problematic for a number of reasons. Initially, the paper did not follow the legal procedures, as the policymakers did not carry out a Socio-Economic Impact Assessment, as required by the Cabinet-approved policy. There was also no public consultation, including with major ICT stakeholders.

While the current policy is not perfect, it is as good as the international standard. This new proposed policy will do the opposite of improving the ICT sector, rather continuing to strangle it with increased red tape.

The path to improving the economy isn’t through state control. History and economics have shown that governments struggle to adequately plan the economy. This is because there are too many factors to plan for. When the government tries to plan and control the economy through price controls and regulations, they only stifle natural market mechanisms and cause confusion.

While the market doesn’t give perfect results, it is not meant to. The market is natural. It is the culmination of all human actions in society and the economy—countless calculations and transactions. No government can account for all of them and when they do, all the information they missed out comes back to bite them. Trying to circumvent the market is like building a boat in a desert. Trying to change the market is like trying to empty the ocean with a bucket.

Governments have never effectively planned or intervened in the market. In an industry as youthful, fast-moving and vibrant as ICT, planning will only stifle creativity and innovation. ICT is an entrepreneurial industry and should not be treated like Lenin’s ‘Commanding Heights’ (heavy industries that countries rely upon). It should be treated like a hybrid of art and commerce. An advanced, rapidly evolving and, most importantly, laissez-faire industry.

What should the government do?

If the government is genuinely concerned with maximising South Africa’s potential to take advantage of ICT and the Fourth Industrial Revolution, it needs to abandon this notion that it needs to take front-seat in directing how the industry evolves. Rather, it needs to step back and get its ducks in a row—letting the ICT industry grow organically and unrestrained.

What the government can do is deregulate. There are currently many laws holding back ICT companies, such as licensing and draconian labour regulations. These policies hold back new entrants to the marketplace, establishing veritable monopolies like the current reigning cellular operators. The original technological revolutions happened in times of free enterprise—where the competition was unrestrained and new market entrants could enter at any time to invent, innovate and thrive.

The ICT industry needs to allow for easy entry by new enterprises to have a shot at prospering in South Africa.

One such ICT industry that needs drastic liberalisation is radio. Currently, even private radio stations are strictly regulated. New entrants are held back and current enterprises are inhibited from reaching their full potential by regulations.

Radio should be a free market, whereby radio operators can easily and freely trade spectrums and frequencies, as well as choose their own content and business practices, without state intervention holding them back.

If ICT and technological innovation are to take hold in South Africa, the government needs to let it. Top-down dictates don’t work, only grassroots entrepreneurship and innovation. The state needs to focus on its genuine functions of security and providing a workable legal system, and leave the economy to the businesses and hard-working entrepreneurs who grow it. That is how South Africa will increase its ICT profitability.

Succinctly: the path to ICT success is not through technology plans or state intervention, but through the drive, creativity and grit of South Africans. All the government must do is free the market and let the passion of our ICT entrepreneurs lead us down the path to the Fourth Industrial Revolution. 

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This edition

Issue 68