The impact of Malatsi's EEIP on rural connectivity and economic growth

IOL News

11-06-2025

Communications and Digital Technologies Minister Solly Malatsi. The writer says his recent policy direction to recognise EEIPs in the ICT sector must be applauded.
Image: X/IOLGraphics
THERE is an old saying: Repeating the same actions and expecting different results is the definition of futility.
For decades, South Africa under ANC rule has tried to marry economic growth with rigid, quota-based transformation policies. The results of which are, unfortunately, low growth, soaring unemployment, deepening poverty, and worsening inequality.
The Western Cape has taken a different path while in support of transformation, one based on merit, capability, and performance. Transformation here is not a tick-box exercise but a tangible outcome of appointing people who are fit for purpose and investing in what works.
The results speak volumes: efficient service delivery and a resilient economy that consistently outperforms other provinces.
It is within this context that Minister Solly Malatsi's recent policy direction to recognise Equity Equivalent Investment Programmes (EEIPs) in the ICT sector must be applauded. This move represents a significant shift away from box-ticking compliance toward meaningful inclusion by facilitating investment in digital infrastructure rather than enforcing ownership quotas.
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Crucially, connectivity is no longer a luxury — it is a prerequisite for economic participation. High-speed internet, particularly through satellite services such as Starlink and other alternative providers, can bring previously disconnected rural areas into the digital economy.
Such access opens up transformative opportunities in education, entrepreneurship, employment, and service delivery.
The Business Process Outsourcing (BPO) sector, particularly call centres, offers a clear example of what is possible with the right infrastructure. According to a 2021 Wesgro report, 74% of Africa's BPO economic activity occurs in Cape Town, which is leading the charge.
The city's appeal lies in its diverse economy, deep talent pool, and robust infrastructure. It offers 65% to 70% lower operational costs than tier-2 cities in the UK, making it a magnet for international investment.
There is compelling evidence that improved internet access leads to higher productivity, increased wages, and better employment prospects. Studies show that in developing countries, firms with reliable internet connections are more likely to increase sales and export volumes.
A recent study in Colombia found that rural firms located in areas where high-speed internet infrastructure was rolled out experienced a significant rise in exports.
In South Africa, towns such as Beaufort West exemplify the unrealised potential of rural communities. With youth unemployment sitting at about 55% in the Central Karoo and with infrastructure like the unused Land Bank building readily available, the town could be a natural candidate for BPO investment.
However, the current lack of reliable, high-speed internet is a major barrier. It is not for a lack of willingness or resources — it is the digital infrastructure that is holding these towns back.
By contrast, Cape Town's digital ecosystem enables businesses and individuals to thrive. Faster speeds, higher bandwidth, and stable connectivity are not just conveniences — they are economic enablers.
For towns like Beaufort West and broader regions such as the Karoo, challenges like poor soil conditions limit large-scale crop production. Improved digital infrastructure would empower farmers with tools such as remote livestock monitoring, GPS tracking, health diagnostics, and access to real-time market prices, enabling better herd management, reduced losses, and improved productivity.
Connectivity also plays a vital role in rural safety, offering digital surveillance systems and rapid communication channels to help combat livestock theft and other forms of farm-related crime. Bridging the digital divide is therefore not just about economic growth; it is about long-term sustainability for rural livelihoods.
This is where Minister Malatsi's initiative becomes pivotal. EEIPs that allow international technology investors and innovators to support South African connectivity goals without navigating outdated B-BBEE ownership constraints. This is exactly the kind of progressive thinking the country needs.
The broader economic imperative cannot be ignored. The Government of National Unity (GNU) has made a clear commitment to growing the economy and creating jobs. Outdated legislation and failing infrastructure must not be allowed to stand in the way. The country's economic future depends on urgent reform and enabling environments.
Recent data from Statistician-General Risenga Maluleke provides a sobering picture. Household reliance on social grants rose from 21.3% in 2009 to 28.8% in 2020, before marginally decreasing to 23.8% in 2024. In provinces such as the Eastern Cape (38.9%), Northern Cape (34.4%), and Limpopo (33.8%), grants remain the primary source of income. This entrenched dependence is a reflection of how deeply economic exclusion runs, particularly in rural South Africa.
In contrast, the Western Cape recorded the lowest grant reliance at 14%, with 68.2% of households earning their income through employment. This is not a coincidence — it is the result of policies that prioritise economic growth and individual empowerment over bureaucratic box-ticking.