Digitalization is a tremendous opportunity for South Africa to reignite productivity, income, and economic growth. To participate in the digital economy, the country’s department of Communications and Digital Technologies has outlined plans to phase out its 2G and 3G networks by 2025.[1]
Alongside this national plan of action, the country is moving ahead with plans to migrate consumers to 4G and 5G networks. Telecom operators Vodafone and MTN launched the first 5G network in 2020, offering 5G mobile services in several locations across South Africa.
4G and 5G networks improve on the old technology in terms of stable connectivity, higher speeds of data access, lower response time in sending and receiving data, and better overall functionality.
For instance, when South Africa went into lockdown in early 2020, people with access to faster connectivity and smartphones could continue to work, conduct business, learn, and socialize online. Such a scenario illustrates the economic and social impact of 4G and 5G.
“Connectivity in Africa plays a critical role in the upliftment of the continental economy. The growth in 5G and 4G network coverage will become a major catalyst for innovation, connection, and opportunity for Africans everywhere…”
Hossam Kandeel, VP & Head of Global Customer Unit MTN & Customer Unit MTN Africa at Ericsson MEA
South Africans own mobile phones, but smartphone adoption is modest
Although the South African government is making efforts to push new technology, not all consumers have the resources to access mobile services. There are a lot of obstacles hindering the adoption of 4G and 5G, including a lack of awareness, digital skills, data costs, and unaffordable mobile devices.
According to an ICASA 2021 report, around one-third of subscribers in South Africa do not have access to a smartphone. [2] A digital divide still exists. Wealthier people in most countries are more likely to own mobile handsets of all types, but the gap increases for smartphone ownership.It is the same situation in South Africa. According to Pewresearch, 67% of higher-income people own a smartphone, compared to just 37% of lower-income people. [3]
Embracing 4G & 5G for growth but smartphone affordability challenges remain
The average selling price (ASP) of smartphones has reduced in recent years with the influx of below-USD 100 handsets [4]. However, affordability of mobile handsets still remains an obstacle to smartphone adoption. Studies estimate that a USD 62 priced smartphone could cost up to 63% of the average monthly income across the African continent. [5]
Even the cheapest smartphone models in South Africa, for example, powered by an AndroidOS, would still work out to be high-priced relative to consumers’ monthly income. Purchasing a smartphone with a single upfront payment is impractical for the majority of consumers. Consequently, handset affordability becomes a top barrier to accessing mobile internet.
Against this backdrop, device financing schemes are key to increasing smartphone affordability. Device financing will allow low-income consumers to purchase smartphones by making monthly payments instead of a part or full payment. Telecom or mobile network operators can provide subsidies on smartphones as a part of the contract or bundled plan.
The stakeholders in the mobile ecosystem, including telecom operators and OEMs, can significantly reduce costs and improve access to smartphones. However, companies carry the inherent risk of bad debt—consumers failing to make timely payments.
How Device Financing Risk Management (DFRM) Helps
To address payment default and delinquency, NuovoPay encourages consumers to make timely payments with automated payment reminders. Telecom carriers can detect and prevent fraudulent activities, such as SIM-swap, and improve payment surety.
Device financing companies can follow up with consumers until they make their payments and when payment is past the due date, companies can restrict certain or all device functions.
To know more about how NuovoPay’s DFRM solution can support device financing initiatives, ask for a free consultation.
References –
