July 6, 2010

Doing Business in a Poor South African Neighborhood

PBS Newshour aired a segment on July 5, 2010 about the efforts of a South African company, Dabba Telecom, which is selling mobile phone and Internet services in one of Johannesburg’s poor neighborhoods. Dabba’s Rael Lissoos says less than one percent of households in South Africa can afford landlines. Given the high cost, people are forced to use prepaid cell phones at rates three times what Americans pay for a similar service, even though South African earn significantly less. Moreover, as explained by Newshour’s Fred de Sam Lazaro, “Lissoos says the huge fees to connect or terminate calls to even local phone networks hurt South Africa’s competitiveness against countries with much lower telecom rates, like India and China.”

Beyond becoming more competitive with other emerging or developing nations, broadening access to cheaper mobile and Internet services helps bridge the digital divide that prevents people from gaining the skills required to compete in a global economy. In addition, companies are formed and jobs created that help stimulate the economy for individuals and entire communities including those living in poverty. The news segment highlights a South African entrepreneur, Collins Moyo, who owns two Internet cafes. Mr. Moyo claims that without Dabba’s lower connection rates, he would have no profit. “If, say, I can pay 10 rand to telecom, maybe Dabba, I can pay two rand, so I’m saving eight rands.” He says the 80 percent savings is allowing him to expand to a third store.

The most remarkable point of the story is the fact the private sector, not the government, is increasing the Internet footprint to an underserved population. For developing countries like South Africa, people must have regular access to modern information and communication technology devices and services. Efforts like Dabba Telecom should be replicated in other developing countries. You can watch the Newshour segment by clicking on the link below:

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