Zimbabwe risks lagging behind in digital era

By Staff reporter | 16 Jun 2020 at 14:14hrs
ZIMBABWE risks being left behind in the digital era and this has been accelerated by the COVID-19 pandemic as local mobile network operators (MNOs) continue to charge subeconomic tariffs amid rising operating costs.

With the country in lockdown indefinitely since March 30, Zimbabweans have had to deal with isolation, social distancing and working from remote locations instead of the office and normal workplaces.

This has meant more and more people have been forced to turn to the internet for communication, business and day-to-day work.

Observers believe this is likely to be the new normal even post-lockdown restrictions.

Whether one lives in town, in peri-urban areas, on a farm or in the rural areas; the shift towards telecommuting and e-learning will drive demand for connectivity.

Mobile network operators and internet access providers will now have to invest in new capacity and new technology if they are to get everyone connected.

Upgrades and maintenance will also be required, but with tariffs that continue to lag behind operating costs, this might not be achievable.

Inflation which has remained high since last year and a weakening local currency have seen most internet service providers (ISPs) struggle not only for profitability but also to keep their businesses running.

Inflation reached 765,57% in April 2020 while the exchange rate on the widely used "alternative" open market depreciated to 75:1 to the US dollar, from around 4,75:1 in April 2019.

As a result, MNO voice tariffs are now only 33% of what they were in April 2019 when they were approximately $0,22 cents per minute, or US$0,0463 but are now $1,17 or US$0,0156.

Similarly, data bundles are now just 28% of what was charged back in April 2019 when they were around Z$0,05 or US$0,0105 per megabyte, but are now currently approved at approximately $0,23 or US$0,003.

The tariffs have thus significantly lagged behind inflation and currency depreciation to the detriment of the industry's ability to retool, pay off foreign debt and forex denominated licence fees.

This is despite the Postal and Telecommunications Regulatory Authority of Zimbabwe (Potraz) saying it was now using a new tariff model, the Telecommunications Pricing Index (TPI), which takes into account the "cost of providing services, market trends, economic fundamentals and affordability".

Tariffs for telecommunication services have not been aligned to the movement in the cost of service provision as well as the new exchange rate both on the interbank and the alternative market.

It is a fact that has been acknowledged by Potraz in its 2020 first quarter sector report, giving a glimmer of hope to operators that they may get a respite soon.

"Given the current inflationary pressures in the economy, operating cost containment will be even more crucial for operators to maintain profitability as the growth of operating costs poses a threat to operator viability," the report reads in part.

The regulator said the performance of the sector continued to be dependent on the economic environment which "impacts the sector through service demand and consumption levels, operating costs, investment and others".



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