ILITHA FIBRE PILOT PHASE - FIBRE ROLL OUT - Trusted Partners Africa
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TEDCO CIVIL ENGINEERING & DEVELOPMENT SERVICES ILITHA FIBRE PILOT PHASE FIBRE ROLL OUT SOCIO-ECONOMIC IMPACT ASSESSMENT November 2020 – FINAL Report Ilitha Fibre Pilot Phase Roll Out Socio-Economic Impact Assessment – FINAL REPORT 1
CONTENTS 1. INTRODUCTION 1 1.1 Brief Description 1 1.2 Scope and Purpose 1 1.3 Delineation of Study Area 2 1.3.1 Study Area 2 1.4 Methodological Approach 5 1.5 Impact Assessment Framework and Approach 6 2. POLICY & LEGISLATIVE FRAMEWORK 8 2.1 National Legislation 8 2.1.1 National Development Plan (NDP), Vision 2030 (2012) 9 2.1.2 South African Economic Reconstruction and Recovery Plan, 2020 (COVID-19 Response) 9 2.1.3 National e-Strategy Plan, 2017 9 2.1.4 National Integrated ICT Policy White Paper, 2016 11 2.1.5 National Broadband Policy, 2013 12 2.2 Provincial Legislation 13 2.2.1 KZN Provincial Growth and Development Strategy (PGDS), 2011 13 2.2.2 KZN Provincial Economic Recovery Plan, 2020 (COVID-19 Response) 13 2.2.3 KZN Digital Transformation Strategy, 2020 14 2.3 Local Legislation 14 2.3.1 eThekwini Metropolitan Municipality Spatial Development Framework (SDF), 2017 15 2.3.2 eThekwini Integrated Development Plan (IDP), 2018 15 2.3.3 eThekwini Economic Development and Job Creation Strategy 2013-2018 16 2.4 Synthesis 17 3. SOCIO-ECONOMIC & ECONOMIC ANALYSIS 18 3.1 Overview of eThekwini and the Study Area 18 3.1.1 Demographic Overview 18 3.1.2 Population Growth Estimates 20 3.1.3 Land Use 21 3.2 Economic Profile 21 3.2.1 National Economic Overview 21 3.2.2 Assessment of Business Confidence Levels in South Africa 22 3.2.3 National Sub-Investment Downgrades 23 3.3 Regional Economic Profile 24 3.4 Impacts of COVID-19 on the National Economy 25 3.5 Impacts of Broadband Accessibility on the Economy 26 3.5.1 Broadband Penetration in South Africa 26 3.5.2 Benefits of Broadband Accessibility 27 3.6 Synthesis 28 4. IMPACT ASSESSMENT ASSUMPTIONS 29 4.1 Ilitha Fibre Network Assumptions 29 4.1.1 Construction Phase Assumptions 29 4.1.2 Operation Phase Assumptions 30 Ilitha Fibre Pilot Phase Roll Out Socio-Economic Impact Assessment – FINAL REPORT i
5. POTENTIAL ECONOMIC IMPACTS AS A RESULT OF THE ROLL OUT OF THE ILITHA FIBRE NETWORK PILOT PHASE 31 5.1 Defining Economic Impacts 31 5.1.1 Temporal Nature of Impacts 31 5.1.2 Types of Economic Impacts 31 5.1.3 Economic Impacts Considered 32 5.2 Economic Impacts During the Construction Phase 32 5.3 Economic Impacts During the Operational Phase 33 6. STAKEHOLDER ENGAGEMENT 34 6.1 Description of Engagements 31 6.2 Results and Discussion 35 6.2.1 View Towards Fibre and Internet Connectivity 35 6.2.2 Benefit to Organisation / Business 35 6.2.3 Current Internet Connectivity Method 35 6.2.4 Interest in Utilising Fibre-Based Internet in the Future 36 6.2.5 Potential Benefit for Members / Customers 37 6.2.6 Potential Benefit for Community 37 6.2.7 Potential Negative Impacts 37 6.3 Synthesis 38 7. EVALUATION OF IMPACTS AS A RESULT OF THE ILITHA FIBRE NETWORK PILOT PHASE ROLL OUT 34 7.1 Construction Phase Impacts 39 7.1.1 Positive Impacts During Construction 39 7.1.2 Negative Impacts During Construction 44 7.2 Operational Phase Impacts 49 7.2.1 Positive Impacts During Operation 49 7.2.2 Negative Impacts During Operation 57 7.3 Net Effect and Trade-Off Analysis 60 8. MITIGATION AND MANAGEMENT 62 9. CONCLUSION 68 REFERENCES 70 Ilitha Fibre Pilot Phase Roll Out Socio-Economic Impact Assessment – FINAL REPORT ii
1. INTRODUCTION This specialist Socio-Economic Impact Assessment (SEIA) study by Urban-Econ Development Economists forms part of the Ilitha Telecommunications (Pty) Ltd submission to the Development Bank of Southern Africa (DBSA) for the proposed Ilitha fibre-to-the premises (FTTP) Phase 1A project. The project is part of a broader objective to improve South Africa’s broadband penetration rate and support the digital economy. A major priority to ensure this is to provide affordable broadband networks in rural and under- serviced areas across South Africa. The Ilitha fibre roll out is therefore a pilot project intended to be rolled out in the greater Inanda/Phoenix/Kwamashu areas located in the eThekwini Metro. This report seeks to assess the potential socio-economic impacts the proposed project may have on the selected communities. This is done by analysing the prevailing socio-economic dynamics in the area, stakeholder engagements and high-level impact modelling. The study is guided by national legislation and regulations to ensure compliance with E&S standards. In addition, the project sponsor’s (DBSAs) Environmental and Social Safeguard Standards (ESSS) were also considered in the process of conducting this study. 1.1 Brief Description The proposed Ilitha optic fibre project will target the roll out of 220 000 FTTP household connections for the communities of greater Inanda, Phoenix and Kwamashu areas. The objective is to provide access to affordable fixed broadband. It is envisaged that Ilitha’s optic fibre network will be a full open access network which means that other Internet Service Providers (ISPs) will be able to sell their products on the network. Their will, however, also be Ilitha’s own products available to be sold over the network. A total of four product packages are envisaged, which include three 24-hour products and one monthly product offerings. Some of the key milestones associated with the project include network planning and design phase (pole and cable distribution outlay), construction (digging holes for pole planting and cable laying) and operations (roll out to customers) 1.2 Scope and Purpose The purpose of the SEIA is to determine the potential socio-economic implications of the proposed project activities. The SEIA report addresses the impacts as set out in the guidelines in terms of the Environmental Impact Assessment Regulations of 2014, as amended. Specific focus areas for the study include: • Demonstrate how the project aligns to all local, regional, and national institutional legislation/policy • Collection of socio-economic & economic data (baseline) • Stakeholder engagement with community leaders and representatives to evaluate overall stakeholder support of the intended project • Collect information on the current activities undertaken in and around the study area, (i.e. other applicable development projects) Ilitha Fibre Pilot Phase Roll Out Socio-Economic Impact Assessment – FINAL REPORT 1
• Identify the potential behavioural & cultural changes that the proposed project will have on the local community/economy • Quantify the potential positive and negative effects of the proposed project and its alternatives (if applicable) on the socio-economic environment in the delineated study area • Evaluate the change in the size and composition of the local and regional economies that will be stimulated by the proposed development, as well as the state of local businesses • Consider a cost-benefit approach towards evaluating the projects impacts • Develop a management and mitigation plan by proposing mitigation measures for negative effects and enhancement measures for positive impacts, supported by methods for the implementation, timeframes, costs, and responsibilities information 1.3 Delineation of the Study Area Study area delineation depends on the type of economic activity that is analysed and the perceived spread of economic impacts that are expected to be generated from the project during both the construction and operational phases. The site as well as the municipal area (eThekwini Metropolitan Municipality) is likely to experience direct, indirect and induced impacts resulting from the activities on the site during construction and operation. Economic impacts will likely extend to beyond municipal boundaries and spread throughout the entire national economy as a result of the various inputs required. 1.3.1 Study area The footprint of the Ilitha fibre roll out will stretch across a 96.2 km2 area which covers communities in KwaMashu, Inanda, Phoenix, and Ntuzuma. Table 1.1 illustrates all the sub-places1 that fall within the study area for the project Table1.1: Sub-places within the study area for the Ilitha fibre project pilot roll out KwaMashu Besters KwaMashu A Dalefarm KwaMashu J Duffs Road KwaMashu K Emakhosini KwaMashu M Emgidweni KwaMashu N Emlandweni KwaMashu P Emlanjeni KwaMashu Q Enkanyisweni Mount Moriah (partial) Ezikhalini Ezilwanen Inanda Inanda Congo Langalibalele Inanda A Lindley Amatikwe Mshayazafe Amatikwe Area 10 Newtown B 1Sub-places and main places are spatial demarcation areas developed and utilised by Statistics South Africa and the Municipal Demarcation Board. They can be utilised as a means to obtain statistics of an area at a local level. A sub-place is a portion of a main place (StatsSA, 2001). Ilitha Fibre Pilot Phase Roll Out Socio-Economic Impact Assessment – FINAL REPORT 2
Amatikwe Area 8 Newtown C Amatikwe Area 9 Nhlungwane Bhambayi Shembes Village Ezimangweni Soweto Glebe Tafula (partial) Goqokazi Inanda A SP Phoenix Brookdale (partial) Redfern Caneside Rockford Centenary Park Rydalvale Clayfield Shastri Park Eastbury Southgate Foresthaven Stanmore Greenbury Starwood Grove End Stonebridge Lenham Sunford Longcroft Trenance Manor (partial) Northcroft Westham Phoenix Industrial Whetstone Rainham Woodview Esibubulungu Ntuzuma Other Areas Lindelani C Inanda B SP Lindelani D Phola Mission SP Ntuzuma B Siyanda A Ntuzuma C Siyanda B Ntuzuma E Zimbabwe Ntuzuma F Ntuzuma G Ntuzuma H Ilitha Fibre Pilot Phase Roll Out Socio-Economic Impact Assessment – FINAL REPORT 3
The map below indicates the locality of the proposed fibre development area in relation to the eThekwini Metro as a whole. Figure 1.1: Study area in relation to the eThekwini Metro Ilitha Fibre Pilot Phase Roll Out Socio-Economic Impact Assessment – FINAL REPORT 4
The map below indicates the sub-places and main places that were utilised to delineate the study area for which data was drawn. Figure 1.2: Main places and sub-places of the delineated study area 1.4 Methodological Approach The following section outlines the methodology that was followed in the report. The technical methodology adopted based on the project scope and objectives is shown in eight (8) steps detailed below. Ilitha Fibre Pilot Phase Roll Out Socio-Economic Impact Assessment – FINAL REPORT 5
Figure 1.3: Project methodology 1. Project 2. Policy and 4.Socio-Economic Orientation 3.Situation Planning and Economic Environment Profile Analysis Indicators 7.Management & 5.Stakeholder 6. Impact Modelling Mitigation Plan Engagement Project Inception and Orientation – This step entailed initiating the project and mobilising the required resources. The project team scheduled an inaugural start-up meeting with the client to finalise all project- related issues such as the scope, goals and objectives, programme, etc. As part of the inception and orientation phase the methodology was presented to the Project Steering Committee (PSC) on the 3rd November 2020 and was subsequently approved. Policy and Planning Environmental Profile – This step entailed extensive examination of national policies (NDP, National Broadband Policy 2013 etc.), relevant provincial and local documents and policies (KZN Provincial Growth and Development Strategy, eThekwini LED, Economic Recovery Plan & SDF etc.) in order to align the project to national, provincial and local government goals and objectives. Situation Analysis - This step entailed the delineation of study area, compilation of the Socio-Economic and Economic Profile of the study area. Socio-Economic and Economic Indicators Identification – The purpose of this step was to determine key socio-economic and economic indicators for examination. This included an assessment of impacts on economy (economic) and impacts on community & culture (social). Stakeholder Engagement – This step included identification and engagement of key stakeholders including community representatives, local community leaders, etc. Impact Modelling – This step entailed the assessment of the projects impact on GDP (direct, indirect and induced), on production (direct, indirect and induced), skills development and employment (direct, indirect and induced), on household incomes etc. (direct, indirect and induced) and on social cohesion, accessing education, work opportunities etc. Management and Mitigation Plan – In this final step mitigation measures for negative effects and enhancement measures for positive impacts, methods for the implementation (i.e. HR & Health & Safety), timeframes, costs and responsibilities information were compiled. 1.5 Impact Assessment Framework and Approach All impacts identified were evaluated in terms of the extent, duration, magnitude, probability, and significance. These are based on the National Environmental Management (NEMA) Act 107 of 1998 (as Ilitha Fibre Pilot Phase Roll Out Socio-Economic Impact Assessment – FINAL REPORT 6
amended in 2017) (South Africa, 2017). The following approach was used to assess each of these aspects of the impact: • The nature, which shall include a description of what causes the effect, what will be affected and how it will be affected.1 • The extent, wherein it will be indicated whether the impact will be local (limited to the immediate area or site of development) or regional, and a value between 1 and 5 will be assigned as appropriate (with 1 being low and 5 being high): • The duration, wherein it will be indicated whether: ➢ the lifetime of the impact will be of a very short duration (0–1 years) – assigned a score of 1; ➢ the lifetime of the impact will be of a short duration (2-5 years) - assigned a score of 2; ➢ medium-term (5–15 years) – assigned a score of 3; ➢ long term (> 15 years) - assigned a score of 4; or ➢ permanent - assigned a score of 5; • The magnitude, quantified on a scale from 0-10, where a score is assigned: ➢ 0 is small and will have no effect on the environment ➢ 2 is minor and will not result in an impact on processes ➢ 4 is low and will cause a slight impact on processes ➢ 6 is moderate and will result in processes continuing but in a modified way ➢ 8 is high (processes are altered to the extent that they temporarily cease) ➢ 10 is very high and results in complete destruction of patterns and permanent cessation of processes • The probability of occurrence, which shall describe the likelihood of the impact actually occurring. Probability will be estimated on a scale of 1–5, where 1 is very improbable (probably will not happen), 2 is improbable (some possibility, but low likelihood), 3 is probable (distinct possibility), 4 is highly probable (most likely) and 5 is definite (impact will occur regardless of any prevention measures). • the significance, which shall be determined through a synthesis of the characteristics described above and can be assessed as low, medium or high; and • the status, which will be described as either positive, negative or neutral. • the degree to which the impact can be reversed. • the degree to which the impact may cause irreplaceable loss of resources. • the degree to which the impact can be mitigated. The significance is calculated by combining the criteria in the following formula: • S=(E+D+M)P where: • S = Significance weighting • M = Magnitude • E = Extent • P = Probability • D = Duration The significance weightings for each potential impact are as follows: • < 30 points: Low (i.e. where this impact would not have a direct influence on the decision to develop in the area), • 30-60 points: Medium (i.e. where the impact could influence the decision to develop in the area unless it is effectively mitigated), • 60 points: High (i.e. where the impact must have an influence on the decision process to develop in the area). Ilitha Fibre Pilot Phase Roll Out Socio-Economic Impact Assessment – FINAL REPORT 7
2. POLICY AND LEGISLATIVE FRAMEWORK The following section provides an overview of key national, provincial, local policy documents and legislation applicable to the Information and Communication Technology (ICT) industry regulation and development in South Africa. The reviewed documents are summarised in the context of the proposed fibre optic roll out in the eThekwini Metropolitan Municipality. The purpose of this review is to ensure the proposed project is aligned with the broader objectives of government’s ICT strategy and development. 2.1 National Legislation The following sub-section outlines the relevant national policy utilised to align the proposed project. 2.1.1 National Development Plan (NDP), Vision 2030 (2012) The National Development Plan (NDP) is the overall guiding document for South Africa’s economic development and growth path. The NDP aims to develop a dynamic and connected information society underpinned by a knowledge-based economy which will be inclusive and prosperous by 2030. In pursuit of this objective the NDP recognises the critical role ICT will play in achieving the developmental goals of South Africa to transform it into a globally competitive economy with effective ICT systems which enables its citizens to connect with the world. An integral part of this objective is to ensure the building of ICT supporting infrastructure which will enable the widespread of digital communication systems. The NDP further highlights that in building such ICT infrastructure, presents opportunities for job creation and skills development. Constructing and maintaining communications networks will generate both skilled and unskilled jobs. Demand stimulation and job development opportunities in the short to medium term (such as digging trenches or spanning cables for expanding networks) and skilled work over the longer term (as networks need to be maintained, upgraded, and refurbished). In broader terms the NDP identifies some of the key benefits that may accrue from developing the South Africa’s ICT sector. These include the following: • Connect public administration and the active citizen • Promote economic growth, development, and competitiveness. • Create decent work. • Support local, national, and regional integration. • Enhance communication and information flows that improve productivity and efficiency The NDP also highlights some of the key challenges that the ICT sector faces in South Africa. These include the following: • Lack of state intervention to propel the growth of the sector. South Africa has lost its status as continental leader in internet and broadband connectivity. Ilitha Fibre Pilot Phase Roll Out Socio-Economic Impact Assessment – FINAL REPORT 8
• Deterioration of fixed-line connections by switching to mobile networks. In the short term, this may lock South Africans out of global networks in the longer term as applications in other countries are increasingly based on ultra-high speed “fibre to premises” network • Insufficient large-scale investment (through both public and private funds) to allow for extension of ICT infrastructure that supports the economy. • Lack of access to low-cost, high-speed international bandwidth with open-access policies. The proposed fibre roll out project is well aligned with the developmental objectives of the NDP. The project will assist in addressing some of the key socio-economic challenges facing South Africa which include unemployment, inequality, and the need to grow the economy. 2.1.2 South African Economic Reconstruction and Recovery Plan, 2020 (COVID-19 Response) The advent of the COVID-19 global outbreak has had a major impact on the world both in economic and social terms. According to the World Bank (2020) some of the major consequences that will result from the pandemic will include: • Reduced global trade • Capital flow to emerging economies declining • Increased global unemployment • Increased global poverty levels Given this bleak outlook countries have had to respond to these challenges by implementing mitigating policies to combat the effects brought on by the COVID-19 outbreak. The South African government therefore has drawn up a Reconstruction and Recovery Plan to stimulate the economy of South Africa and steer it towards economic growth aligned to the objectives set out in the NDP. The main pillars that the plan include the following: • Aggressive infrastructure investment • Employment orientated strategic localization, reindustrialization, and export promotion. • Energy security • Support for tourism recovery and growth • Gender equality and economic inclusion of women and youth • Green economy interventions • Mass public employment interventions • Strengthening food security • Macro-economic interventions Considering the impacts brought by COVID-19 on the South African economy, there is a need to prioritise projects that can assist the government in addressing the challenges the economy is faced with. The proposed fibre roll out project will play a significant role in addressing two very important objectives of the Reconstruction and Recovery Plan, namely infrastructure investment and creation of employment opportunities. 2.1.3 National e-Strategy Plan, 2017 South Africa’s National e-Strategy aims to position South Africa as a significant player in the development of ICT throughout the value chain of the sector as well as accelerate the uptake and usage of ICT in Ilitha Fibre Pilot Phase Roll Out Socio-Economic Impact Assessment – FINAL REPORT 9
other social and economic sectors. In essence this deals with the transformation of South Africa into a full digital society marked by a widespread diffusion, uptake, and usage of ICT throughout. This is critical for the government and society wide on-going interventions to accelerate growth and facilitate economic and social inclusion. The ICT sector has a significant role to play in driving and enabling the new growth and developmental trajectory. The National e-Strategy sets out key objectives which guide the development of the ICT sector in South Africa. These objectives include: I. Enabling policies: South Africa’s ICT and related policies should be forward looking, transparent and predictable ICT to enable inclusive growth and development. II. Infrastructure: the digital society will be underpinned by the availability of infrastructure throughout the country. Interventions are thus needed to stimulate both the public and private sector investments building on SA Connect and the introduction of supply side interventions to promote competition and SMME development in the telecommunications and broadcasting industries. III. Universal access: all South Africans should have access to affordable user devices and high- quality services irrespective of geography and social status. IV. Security: citizens should trust the ICT environment knowing that their information and transactions are protected. V. Content: South Africans should be involved in the development of local content taking advantage of the ubiquitous nature of the ICT sector. There is a big scope for South Africa to emerge as one of the leading content industries on the continent and in the rest of the world. Strong and affordable content rights management and protection must support this. VI. Innovation: government and society as a whole should pay specific attention to the development of local intellectual property and knowledge to encourage and support local production and manufacturing. Importantly, innovations should be geared towards growing the ICT sector while at the same time introducing ICT enabled solutions in the other key sectors of the economy. VII. Skilling the nation: a massive skills development programme to create awareness, demystify technologies and extend the use of technology to embark on complex transactions should underpin the uptake and usage of ICTs in the whole society. The plan in centred around three core pillars which are: • PILLAR 1: ICT SECTOR INTERVENTIONS o Sector cost structure o Sector competitiveness constraints o Research and development expenditure o ICT skills gap • PILLAR 2: SECTORAL INTERVENTIONS o Revitalising agriculture and the agro processing value chain o Adding value to mineral wealth (advancing beneficiation and support to the engineering and metals value chain) o Resolving the challenge of managing utilities including energy, water, and transportation o Operation Phakisa (ocean economy, mining, health, tourism, basic education, etc.) Ilitha Fibre Pilot Phase Roll Out Socio-Economic Impact Assessment – FINAL REPORT 10
o Unlocking the potential of small, medium, and micro enterprises, cooperatives, and township enterprises o Encouraging private sector investment • PILLAR 3: DIGITAL INDUSTRIAL REVOLUTION o Technologies that enable the South African industry, with specific focus on SMMEs, to develop applications and content that is relevant to majority of South Africans and extend to the whole continent o Technologies that can be transferred to local industry to improve efficiencies in the delivery of services, in the ICT sector as well as in other sectors. o Technologies that disrupt entire industries and as a result create new markets and industries 2.1.4 National Integrated ICT Policy White Paper, 2016 The National Integrated ICT Policy outlines the overarching policy framework for the transformation of South Africa into an inclusive and innovative digital and knowledge society. Government views information and communication technologies as a means to facilitate inclusive socio-economic transformation of South Africa. Key objectives of the policy are to facilitate universal access to ICT to the citizens of South Africa and the regulation of associated infrastructure roll out. 2.1.4.1 Universal Access Universal access to ICT is an important objective to reduce the digital divide. Ensuring universal access to ICT will also result in significant advantages to the ICT market which include: • Increased take up of connected devices. • Increased demand for all services – voice and data – across market segments (residential, public, and commercial) and in all areas of South Africa. • Greater demand for higher quality broadband connections as users increasingly access more content via a range of services, networks, and platforms. • Increased demand by the public, business, academic and other sectors for reliable connectivity and higher bandwidth due to growth in the use of cloud-based services and an increase in the number of connected devices (the Internet of Things However, the policy highlights the issue that, the approach to universal access has mainly focused on extension of infrastructure with little attention to social issues that still need to be addressed such as the following: • Subsidies for special categories of end users including persons with disabilities, • Accesses for those that cannot afford access. • Support to ensure people have the skills to utilise ICT • Ensuring the services and content available are relevant to all users 2.1.4.2 Infrastructure ICT infrastructure is an indispensable component in the development of the information society and the building of a knowledge economy. The current infrastructure market is however is characterised by Ilitha Fibre Pilot Phase Roll Out Socio-Economic Impact Assessment – FINAL REPORT 11
fundamental market problems of ineffective competition, infrastructure sharing bottlenecks and unnecessary duplication of infrastructure. The result of these challenges presents the following problems: • Lack of infrastructure in less affluent areas • High costs to communicate • the inefficient use of scarce resources, i.e. frequency spectrum; and • barriers to entry for new entrants and SMMEs As a consequences of market structure failures pricing, quality of service, and innovation are compromised. Addressing these infrastructure challenges will therefore be of great importance to ensure universal access for all South Africans. The proposed project will therefore assist in meeting the two main objectives of the National Integrated ICT policy by expanding access to ICT to underserviced areas and invest in the development of ICT infrastructure. 2.1.5 National Broadband Policy, 2013 The purpose of Broadband Policy is to create a uniform, integrated, homogeneous and coordinated government approach on the roll out of Broadband in South Africa. The aim is thus to ensure both optimal utilisation of resources and coordinated roll out of infrastructure. The Policy focuses on increasing the accessibility, availability, affordability, and usage of Broadband services throughout South Africa The policy defines Broadband as an: “Always available, multimedia capable connection with a download speed of at least 256 kbps”. Broadband is identified as a strategic tool with which the NDP goals could be achieved due to the benefits associated with mass Broadband roll out. Some of these benefits include the following: • Broadband platforms promote the convergence of voice, data, and audio-visual services onto a single network. • Broadband infrastructure is central in achieving the goal of digital inclusion, enabling universal, sustainable, ubiquitous, and affordable access to ICTs by all. • Broadband provides sustainable connectivity and access to remote and marginalized areas at national provincial and municipal levels. • Broadband provides businesses with an extremely powerful tool that can increase productivity and marketability through the use of communication services • Reduction of cost of communication The lack of affordable universal access to Broadband services, slows economic growth and inhibits social benefits such as better education and health services. Some of the key objectives set out in the policy therefore include: • Articulation of the government's commitment to providing appropriate support for digital inclusion. • Clarify the roles of the Government, State Owned Enterprises (SOEs) and the private sector in developing world-class Broadband infrastructure in the country. • To facilitate the provisioning of affordable, accessible, universal access to Broadband infrastructure to citizens, business, communities and the three spheres of government. Ilitha Fibre Pilot Phase Roll Out Socio-Economic Impact Assessment – FINAL REPORT 12
• Stimulate the usage of Broadband services in order to promote economic development and growth. In addition to economic benefits that arise from Broadband roll out, there are also social benefits that may be to the benefit of communities. Some of these social benefits include the following: • Improved quality of education. • Improved quality and access of health services. • Improved quality and access of government services. • Reduced carbon emissions Lack of investment in broadband infrastructure inhibits access, availability, and affordability to broadband services for many South Africans particularly the poor and marginalised. This may have undesirable consequences that may disadvantage goals set out in the NDP to transform the economy into an inclusive, prosperous, and globally competitive economy. Disadvantages associated with the lack of access to affordable Broadband services include: • Reduced access to e-literacy in the educational system • Lack of access to quality of health services • Lower efficiency in Government processes • South Africa becomes a less competitive destination for investment • Higher cost to communicate • An increase in the digital divide, thus further disadvantaging rural and marginalised communities • Reduced access to employment opportunities and job creation 2.2. Provincial Legislation The following sub-section outlines the relevant provincial policy utilised to align the proposed project. 2.2.1 KwaZulu-Natal Provincial Growth and Development Strategy (PGDS), 2011 The KZN PGDS is the primary strategic framework plan which seeks to guides the accelerated economic growth of KwaZulu-Natal through catalytic and developmental interventions to 2030. With regards to ICT sector development the PGDS acknowledges the important role the sector must play in the province’s growth trajectory. In assessing the provinces ICT sector, the PGDS notes the following: • KwaZulu-Natal, currently, lags in terms of providing affordable and reliable access to telecommunications and the Internet • Internet usage remains extremely low although there has been an improvement in levels of internet usage • There is a need to develop ICT skills for individual efficacy • There is a need to upgrade existing technology • Expand community access to broadband services • Increase bandwidth (speed) for economic competitiveness 2.2.2 KwaZulu-Natal Provincial Economic Recovery Plan, 2020 (COVID-19 Response) The KwaZulu-Natal Provincial Government has tabled an Economic Recovery plan to bolster economic growth for the province. The plan is in response to the impacts associated with COVID-19 and serves as Ilitha Fibre Pilot Phase Roll Out Socio-Economic Impact Assessment – FINAL REPORT 13
the overarching strategic response to guide all municipalities in the province in their local economic recovery planning and ensure alignment to the province’s overall objectives. Some of the targeted intervention set out in the Provincial Economic Recovery Plan include the following five strategic areas of intervention: • Governance • Finance • Basic service delivery • performance management • Implementation of new district development model Furthermore, to support local municipalities and stimulate growth the provincial government will give additional support in the following areas: • Infrastructure development • Support surviving industries • Investment attraction • Red Tape reduction 2.2.3 KwaZulu-Natal Digital Transformation Strategy, 2020 The KwaZulu-Natal Digital Transformation Strategy seeks to accelerate and guide a common, coordinated response to reap the benefits of the current digital revolution. The strategy sets the following objects: • Eradicating the digital illiteracy in government departments • Narrowing the digital divide • Promoting digital skills development • Promoting digitisation of SMME businesses • Expanding development and inclusiveness of digital projects within rural communities • Coordinating business activities efficiently between public and private sector • Increasing connectivity within the province The KwaZulu-Natal Provincial Government lists the following benefits which may be realised by implementing the Digital Transformation Strategy: • Government efficiencies such as record keeping, procurement, financial, etc. • Development of new economies and new opportunities • Trust by sister provinces and regions in the world • Credibility gained from employing technological transformation and advancements • Competitive advantage in production and automation • Advanced data integration and management systems • Advanced tracking of imports and exports 2.3 Local legislation It is also important to consider the relevant local policy and to determine how local legislation may impact or assist such a development. Ilitha Fibre Pilot Phase Roll Out Socio-Economic Impact Assessment – FINAL REPORT 14
2.3.1 eThekwini Metropolitan Municipality Spatial Development Framework (SDF), 2017 The SDF is a strategic document that guides the desirable spatial distribution of land uses and resource within eThekwini Metropolitan Municipality to give effect to the spatial vision, goals, and objectives of the Municipality. The SDF is also aligned with provincial and municipal sector plans and strategies as a way of ensuring that the desired spatial form and outcomes of the Municipality are achieved. Some of the objectives of the SDF include the following: • It facilitates effective use of scarce land resources • It facilitates decision making with regard to the location of service delivery projects • It guides public and private sector investment • It strengthens democracy, inclusivity, and spatial transformation • It promotes intergovernmental coordination on spatial issues • It serves as a framework for the development of lower order plans and Scheme and is the basis for land development decisions Aligned with national and provincial plans to expand community access to broadband services, the SDF draws from the Strategic Infrastructure Program which provides an integrated framework for the delivery and implementation of social and economic infrastructure across South Africa. Some of the envisioned objectives set out to expanding access to communication technology include: • Provide for broadband coverage to all households by 2020 through the following measures: o establishing core Points of Presence (POP’s) in district municipalities o extend new Infraco fibre networks across provinces linking districts o establish POPs and fibre connectivity at local level o further penetrate the network into deep rural areas. The proposed fibre roll out pilot project will therefore assist both the eThekwini Metropolitan Municipality and national government to achieve the goal of expanding access to broadband for citizens. 2.3.2 eThekwini Integrated Development Plan (IDP), 2018 The eThekwini Metropolitan Municipality’s IDP serves as a strategic planning framework to guide the implementation of the city’s developmental goals and objectives. The IDP is a key component of the eThekwini’s ambition to transform the local economy into a competitive region gateway that is well connected to the world. The IDP recognises the crucial importance of developing the ICT’s to ensure wider access to communication technology for the citizens of eThekwini. The IDP highlights the following with regards to ICT development in eThekwini: • The municipality is committed to bridging the digital divide that exists • The municipality has been installing fibre in a phased approach in the eThekwini Municipal area • The main aim of this is to connect all municipal offices to the IT network thus bringing services closer to the citizen • Fibre has been mainly rolled out in the central and northern regions • The rural/traditional areas are the most underserviced wards Ilitha Fibre Pilot Phase Roll Out Socio-Economic Impact Assessment – FINAL REPORT 15
2.3.3 eThekwini Economic Development and Job Creation Strategy 2013-2018 The eThekwini Economic Development and Job Creation Strategy is to set out a new growth path based on a long-term approach in addressing unemployment, poverty, and inequality. This will be done through strategy development and ICT development. a) Strategies Some of the high-level programmes and strategies envisioned in the plan include the following: • Economic Leadership o Provide quality economic research and intelligence to guide decisions o Creating a global and national economic vision for the city and region o Develop meaningful partnerships with business to foster collaboration. • Facilitate Private Sector Investment and Partnership o Develop an investment promotion strategy and investment protocol. o Provide targeted investment retention and expansion o Develop an investment project pipeline in partnership with the private sector • Ensuring Township Development o Building on the momentum created through investment in key township nodes and corridors o Focus on sector projects which facilitate the development of opportunity sectors such as the furniture industry, motor repair, agro-processing, and ICT o Expanding the Township Redevelopment Programme to other townships o Targeting rural nodes and corridors for public investment that provides a platform for private sector investment o Develop and implement an LED programme for key impoverished neighbourhoods (particularly informal settlements) o Develop investment plans as part of plans for township areas and provide incentives for targeted investments in townships b) ICT Development The eThekwini Economic and Job Creation Strategy recognises the important role ICT play in addressing the socio-economic challenges faced by the city. The document makes the following assertion. “IT connectivity is a fundamental part of the way in which cities do business. Part of a city’s competitiveness is its level of global connectivity. This is particularly important for a city that positions itself as a gateway destination. The City must continue to roll out its fibre optic network and create a high-speed and cost- effective business platform”. Some of the benefits that could be realised through developing ICT for the city include the following: • Promote SMME development • e-government • Skills and technology development The proposed fibre roll out project thus is well aligned with the objects of the eThekwini Economic Development Strategy by addressing the two key objectives which are development of townships (Inanda, Ntuzuma, KwaMashu) and increase broadband access for the communities of the targeted areas. Ilitha Fibre Pilot Phase Roll Out Socio-Economic Impact Assessment – FINAL REPORT 16
2.4 Synthesis This chapter has sought to review applicable national, provincial, local policy documents and legislation applicable to the ICT industry regulation and development in South Africa. This was done to determine the alignment of the proposed fibre roll out project in eThekwini with broader ICT objectives in all the respective spheres of government. The NDP recognises the importance of developing the ICT sector to enable access to information and ease of communication to the benefit of all South Africans regardless of geography and socio-economic conditions. Development of ICT infrastructure is an important objective in transforming South Africa’s economy into a digital and knowledge-based economy. This will assist South Africa to improve its global competitiveness. The development of broadband presents both economic and social benefits for communities which may assist in reducing poverty, unemployment, and inequality. In addition, broadband expansion will result in the reduction in the cost of communication which may assist SMME’s to be more competitive through ease of communication. The KwaZulu-Natal PGDS recognises the important role development of ICT infrastructure to assist in transforming the provincial economy into a competitive regional gateway. Both the eThekwini SDF and IDP commit to further development of ICT and universal access to such technologies for the citizens of eThekwini. To this end eThekwini has already begun its fibre roll out initiative. Ilitha Fibre Pilot Phase Roll Out Socio-Economic Impact Assessment – FINAL REPORT 17
3. SOCIO-ECONOMIC & ECONOMIC ANALYSIS This chapter analyses the socio-economic and economic trends and characteristics of the delineated study area as well as eThekwini Metropolitan Municipality as a whole. The analysis will include, population and household demographic indicators, income levels, and employment figures. In addition, the chapter also reviews the economic structure and performance of the formal economy in the broader study area. 3.1 Overview of eThekwini and the Study Area. 3.1.1 Demographic overview Table 3.1 illustrates some of the key socio-economic indicators for the eThekwini Metropolitan Municipality and the proposed study area where the proposed fibre roll out is envisioned. This analysis is useful to better understand the dynamics, size, and status-quo of the study area to enable better planning for the implementation of the proposed project. Table 3.1: Study area socio-economic indicators (forecast to 2020) Indicator eThekwini Study Area Area (km2) 2 291 96.2 Population 3 890 000 723 481 Male Population Total 49.7% 49.5% Female Population Total 50.3% 50.5% Number of Households 1 071 100 192 268 Population Density (km²) 1 697 442 Average Household Size 3.6 3.6 Population Growth CAGR (2009-2019) 1.42% 2.0% Average Monthly Household Income R 15 875 R 9 087 Source: Quantec Standardised Regional (2020) The study area constitutes 4.1% of eThekwini total land area and is home to roughly 19% of its total population. The study areas population growth rate is larger compared to that of eThekwini (1.42%) at 2.0%. Despite the larger population growth, the study area’s average monthly income remains lower than that of eThekwini with household monthly income averaging R9 087 substantially lower than the R15 875 of eThekwini. With an average household size of 3.6 persons per household, household fibre connection will provide access to the internet to nearly 4 people per connection which will mean exponential growth in the number of people who have access to the internet in the area. The area’s lower levels of household income would make a budget friendly and versatile broadband product more attractive to the residents of the area. Table 3.2 below illustrates employment indicators of the study area. The unemployment rate of the study area was 33.1% with 40.0% of the population being in the “Not Economically Active” category. This is higher than in eThekwini which has a “Not economically active rate” of 36.6%. Ilitha Fibre Pilot Phase Roll Out Socio-Economic Impact Assessment – FINAL REPORT 18
Alternatively, over 170 000 of the residents in the area are employed which provides a base from which to build a prospective customer for household fibre connection especially if the product is budget friendly to lower income households. Table 3.2: Study area employment indicators Indicator eThekwini Study Area Employed2 1 223 735 177 177 Unemployment rate3 28.5% 33.1% Not economically active4 36.6% 40.0% Labour force participation rate5 45.3% 54.4% Source: Quantec Standardised Regional (2020) The graph below (Graph 3.3.) illustrates the educational attainment levels for the study area. It is useful to examine education attainment to understand skill levels of both the future users and potential employees in the area. Figure 3.1: Study area education indicators 38,9% 37,0% 10,0% 4,2% 5,6% 3,7% No Schooling Some primary Complete Some Grade 12 Higher primary secondary Source: Quantec Standardised Regional (2020) The graph above indicates that 10.0% of the population have some primary schooling with 3.7% completing this level of education. 37.0% have some secondary education and 38.9% completing secondary education or passing Grade12. 2 A person (between 15 and 64) is considered to be employed if they work for a wage, salary or commission or run any kind of business by themselves or with other people. They will be categorised as “employed” even if they only worked for an hour in that week. 3 This refers to the percentage of the workforce that is unemployed but is willing and able to work and actively seeking employment. 4 A person is considered to be economically inactive if they are able and available to work but do not work, do not look for work and do not try to start their own business. This includes people such as university students and adults caring for children at home. 5 This refers to the proportion of the working-age population that is either employed or unemployed. (Wilkinson, 2020) Ilitha Fibre Pilot Phase Roll Out Socio-Economic Impact Assessment – FINAL REPORT 19
Only 5.6% of the population have a higher education qualification. This low level of educational attainment at a higher level suggests that there may be a large proportion of youth who do not have the opportunity to access higher education and attain high level skills. This lack of higher education attainment leads to an inability to find well-paying jobs to break poverty cycles for themselves and their families. The proposed fibre roll out project may assist those who are unemployed and lacking skills with access to online information, so they are able to find opportunities and unlock their potential, especially the youth. In addition, the graph further indicates that over 80% of the adult population has some degree of education and are thus literate and would be able to be taught to utilise the internet. 3.1.2 Population growth estimates The population estimates are useful for the purpose of estimating possible future demand for household fibre for the selected areas. The Quantec Standardised Regional Database provides population datasets at municipal level, this was used to estimate the average annual eThekwini Metro’s population growth rate between 2011 and 2019, this was calculated to be an annualised growth of 1.37%. Population data, and most other demographic information at a sub-place level is only available up to 2011, as provided for in the Statistics South Africa Population Census (2011). Thus, in order to appropriately forecast the population growth for the study area, the eThekwini’s growth rate was applied to the 2011 Census Population. This calculated growth rate is in line with the Metro’s own 2019 SDF which anticipates a year- on-year growth rate 1.1% for the period 2019 to 2030. The population for the study area was estimated based on the following scenarios: • A 10% variance was assumed for the population estimates, in order reflect the sensitivity of growth forecast model. • Low growth scenario= 1.23% (1.37-0.14%) • Average growth scenario= 1.37% • High growth scenario= 1.50% (1.37% + 0.14%) Table 3.3: Study area population estimates 2020-2035 2020 2035 Low Mid High Low Mid High Population 706 192 723 481 743 489 857 921 917 499 922 894 Source: Urban-Econ calculations based on Quantec Standardised Regional Database & Census 2011(2020) The table above indicates that it is likely that the population of the area will grow from 706 192 (low scenario) and 743 489 (high scenario) in 2020 to 857 921 (low scenario) and 922 894 (high scenario) in 2035. The positive population growth estimation for the study area is a good indicator for the proposed fibre roll out project as it implies there will be more people residing within the area in the future which could result to greater demand of fibre connection in their respective households leading to greater sales volumes and revenues. Ilitha Fibre Pilot Phase Roll Out Socio-Economic Impact Assessment – FINAL REPORT 20
3.1.3 Land use The study area falls within the urban edge and is predominately zoned as residential. The area is characterised by hilly terrain covered by dense housing. Housing consists of either formal township housing, informal dwellings, or traditional housing. The area’s main transport hub (rail station and taxi rank) is in KwaMashu which is well connected to the city via rail and road. Some of the major roads that connect the area to the Durban Central Business District include the N2, N3, Queen Nandi Drive, R103 and the M10. Throughout the area there are various types businesses which are likely to be positively impacted by the availability of fibre internet connection. Some of the existing business in the area include: • Internet and printing businesses • Grocery stores (Spar, Shoprite, and others) • Restaurants • Accommodation establishments In addition, the area also has some well-established economic hubs such as • The KwaMashu Town Centre • Bridge City (between Phoenix and Inanda) • Dube Village (Inanda) • Phoenix Industrial Park • Phoenix Plaza Social services found in the area such as clinics and police services are also likely to benefit from the fibre roll out through easier and efficient communication with the public which would improve public service delivery. In terms of education there are a substantial number of schools located within the study area which would also benefit from the fibre roll out to assist pupils with access to the educational benefits associated with increased internet access. Furthermore, the Elangeni TVET College has campuses throughout Durban some of which are located within the study area. These include: • Inanda campus • Kwa-Mashu campus • Ntuzuma campus The fibre roll out would thus have commercial, social, and educational benefits for the communities affected. This further encourages justification of the fibre roll out project in the study area. 3.2 Economic Profile The following subsection outlines the economic profile at a national as well as a provincial and local municipal level. 3.2.1 National economic overview The South African economy recorded its third consecutive quarter of economic decline falling by 2.0% (seasonally adjusted and annualised) in the first quarter of 2020. The results covered the period from 1 Ilitha Fibre Pilot Phase Roll Out Socio-Economic Impact Assessment – FINAL REPORT 21
January 2020 to 31 March 2020, which included the beginning of the COVID-19 lockdown in South Africa and some of its trading partners. This contraction followed previous contractions of -1.4% and -0.8% in the fourth and third quarters of 2019, respectively (StatsSA,2020). In terms of GDP, The GDP fell by just over 16% between the first and second quarters of 2020, giving an annualised growth rate of -51.2%. This contraction dwarfs the annualised slowdown of -6.1% recorded in the first quarter of 2009 during the global financial crisis (StatsSA,2020). Nearly all industries experienced a massive drop in output in the second quarter of 2020. Construction was the worst affected having already been in decline before the pandemic. The industry experienced its eighth consecutive quarter of economic decline, reaching 76.6% contraction (StatsSA,2020). While softer demand for electricity and water pulled the electricity, gas and water supply industry down by 5.6%, all other activities in the trade industry (food and beverages, wholesale, motor trade, and accommodation) recorded a decline in economic activity. Overall, the industry shrank by 1.2% in the first quarter. Investment spending (gross fixed capital formation) decreased by 20.5%, the biggest fall since the 2008–2009 global financial crisis while mining activity slowed by 21.5%, the biggest decline in six years. Agriculture was the only industry that was relatively unaffected (StatsSA, 2020). The negative impacts of COVID-19 on the economy thus eroded business confidence levels. In addition, the national sub-investment downgrades further strained aspect the national economy. These aspects are discussed below. 3.2.2 Assessment of business confidence levels in South Africa In January 2020 the SACCI Business Confidence Index (BCI) was 92.2 index points and slightly rose to 92.7 in February 2020. However, BCI levels dropped significantly to 89.9 in March making it the lowest level since August 2019. This was due to lower sales of new vehicles, a weaker rand exchange rate and lower share prices highlighting the impact of Coronavirus Disease 2019 (COVID-19) on the country's trading partners and on the domestic economy (SACCI, 2020). In the subsequent months of April and May the downward trend in the BCI continued reaching its lowest level of 70.1% in May 2020. Since then there has been a slow upward rise in the BCI with an increase of 1.4% between June and July 2020. Recovery is, however, uncertain as evidenced by the stagnant BCI movement between August 2020 and September 2020 showing 85.8% and 85.7% respectively (SACCI, 2020). The following indicators negatively contributed to the BCI: • Lower merchandise export volumes • Fewer new vehicles sold • Lower real value of building plans passed • Higher inflation • Share prices • The US-dollar price of precious metals • Rand exchange rate (SACCI, 2020a) (SACCI, 2020b). However, there were positive contributors to the BCI, including: • Energy supply Ilitha Fibre Pilot Phase Roll Out Socio-Economic Impact Assessment – FINAL REPORT 22
• Manufacturing • Imports • Real financing cost (SACCI, 2020a) (SACCI, 2020b). Thus, the business confidence levels in South Africa have been uncertain owing to the abovementioned conditions. Overall, the SACCI BCI trended downwards from 104.7 to 89.9 index points between March 2013 and March 2020. This was equivalent to -2.2% CAGR (SACCI, 2020a) (SACCI, 2020b).Furthermore, business confidence levels in the country plunged to their lowest levels in more than two decades in the first quarter of 2020 and could weaken even further due the full effects of the COVID-19 and oil price drops. These issues affect both the local and global economies (SAPOA, 2020). The BCI does not factor in the full potential economic impact of COVID-19 it only showcases the recent trends of COVID-19 which still need to be quantified. This project will transcend any short-to-medium term economic shocks and is a necessary intervention to assist the local population in developing their potential and local economy. The development of such a project is likely to be seen as a positive step in addressing the challenges facing the national economy. 3.2.3 National sub-investment downgrades On March 27th, 2020 Moody’s Investor Service (Moody’s) downgraded South Africa's long-term foreign- currency and local-currency issuer ratings to Ba1 from Baa3 (Junk Status). Moody’s is the third and last of the major credit rating agencies to downgrade South Africa to junk status after Standard & Poor’s and Fitch’s both downgraded South Africa in 2017 (Duvenage, 2020). While these sub-investment ratings are worrying for the country, it is difficult to understand and predict what will happen to the currency in the short and medium term and currency fluctuations may occur. This is largely as a result of global dynamics that are currently in play, in particular the appetite for safe haven assets which is a far more powerful force than any of the local challenges that are emerging (Duvenage, 2020). One of the known impacts of the downgrade was that South Africa fell out of the World Government Bond Index (WGBI) and other popular bond indexes, an index that measures the performance of fixed- rate, local currency, investment-grade sovereign bonds. The sub-investment rating means that South Africa has dropped out of some of the widely used global bond indexes and forced international funds which track these indexes to sell South African bonds. It is estimated that between $22-$28 billion in capital has already flowed out of local markets since 2018 with the recent downgrade account for between $1,5 and $8 billion (Duvenage 2020; McGregor 2020). This will likely result in a rise in government debt-servicing costs which could already bring strain to the already frail economic system with revenue shortfalls and contraction in GDP (Duvenage, 2020; McGregor, 2020). Furthermore, on the 29th April 2020, Standard & Poor’s Global Ratings further downgraded South Africa’s sovereign credit rating into non-investment grade citing the impact of COVID-19 on South Africa’s public finances and economic growth as one of the reasons for its ratings action (Swart & Goncalves, 2020). The downgrade casts further doubt over South Africa’s ability to recover post COVID-19. Ilitha Fibre Pilot Phase Roll Out Socio-Economic Impact Assessment – FINAL REPORT 23
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