HOW NOT TO DEVELOP AND GROW AN ECONOMY: VODACCOM AND ABSA

Unmasking of Vodacom and MTN racket reveals the unacceptable face of capitalism

  • Sunday Times28 April 2019BARNEY MTHOMBOTHI

The Competition Commission’s report on the high cost of data in SA, released this week, should be welcomed by all who want to stamp out all forms of corporate greed. In essence, the report is not telling us anything we didn’t know: we as customers have been suffering this diabolical treatment at the hands of these ravenous behemoths, and he who feels it knows it. We have known for years, for instance, that both Vodacom and MTN charge far more in SA than they do in other countries. The only surprise is that they have been allowed to fleece customers for so long.

What we didn’t know, however — and it came as a real shock — is the yawning gap between the charges. “Some of the operators charge six to 10 times [more] in SA than they do in other countries, with the data price gap widening rapidly over time,” said James Hodge, the commission’s chief economist. What was also astounding to learn is that the companies’ pricing strategy is geared at sucking even more money from the poor. That’s just intolerable.

What we also know is that these companies are making millions from data bundles that customers forfeit if they haven’t used them by the expiry date. It’s like a supermarket reclaiming a packet of cereal, pint of milk or loaf of bread because you haven’t been able to consume it by its use-by date. Utter madness.

The cellphone companies came into being at the very same time the new SA was born. Initially they were welcomed as saviours and soon thrived in a market that for years had been ill-served by Telkom, a long-standing telecommunications monopoly. But the arrival of these companies has not created the competition that was envisaged, and customers have therefore not benefited from the lower prices that should have accrued.

Instead of imbibing the ethos of fairness and equality in line with the spirit of the new democratic dispensation, they adopted old practices and mutated into an allgrasping duopoly that’s almost become a law unto itself. Cellphone companies are probably among the most unpopular entities in the country. Cries and concerns have fallen on deaf ears. Customers complain, among other things, of extortionate charges and dropped calls as a result of poor network coverage. A cellphone is not a luxury item any more, but an essential tool of communication, especially among poorer and more vulnerable communities.

It is unconscionable that these companies, scions of the new SA, should be at the forefront of exploiting the poor. They’re printing money and their executives are amply rewarded.

But we shouldn’t be too harsh on them. They’re not alone in the bazaar. The economic dynamics in the country seem to allow, if not welcome, such practices. Our banks, for instance, have the highest charges in the world. Canada comes a distant second. And we’re not expected to worry about it because it’s the free enterprise system at work.

When the ANC came to power its reputation was that of an organisation that was generally hostile to the free enterprise system and, what’s more, it had communists tagging along. It was feared that it would uproot a system that had endured under apartheid. But nothing of the sort happened. The ANC left the economy alone, and it, on the whole, thrived, especially under Nelson Mandela and Thabo Mbeki.

Probably in order to preserve its record as a responsible government vis-a-vis the economy, it seems to have decided on a hands-off approach even where action is necessary or advisable.

But capitalism is not the absence of government involvement in the economy. The US, probably the most free-market society on Earth, has some of the strictest antitrust laws. The government or its agencies are very quick to nip any anticompetitive behaviour in the bud. It was, for instance, during the Reagan presidency, perhaps the apogee of US free-market fundamentalism, that AT&T, the vast conglomerate, was broken up into smaller regional companies in order to foster competition in the sector. That move, however, has since been undone with mergers and acquisitions that have rebuilt the old behemoth.

The EU, that mother of capitalist systems, has also been cracking the whip against any form of anti-competitive behaviour. Google, the US tech giant, has in the past three years been fined a total of €8bn (about R114.4bn) for various offences, including abusing its market dominance.

Free enterprise does not mean that entities are free to abuse the system. There have to be rules that ensure a level playing field, and equal treatment for all. And in a country such as ours that is disfigured by dreadful poverty, businesses have to be extra careful not to be seen to be exploiting vulnerable sectors of society. It can’t just be profits at all cost. To use a cliché, they have to be good corporate citizens.

It’s surprising that, given the fact that the majority of voters are struggling to make ends meet, bread-and-butter issues don’t seem to have been uppermost in the current election campaign. Even the initial uproar over the ever-increasing fuel price, which has sent the cost of living skyrocketing, seems to have died down. Instead, we get worked up about land as if its resolution will be a panacea for all our problems.

The capitalist system — which seems under attack on many fronts, including here in SA — can only thrive if it’s seen to be inclusive and, more important, if it treats every participant — rich or poor — fairly and equitably.