Part 2: Why are broadband prices so high in South Africa compared to Kenya?

<img src=http://"Kenyatta_Avenue_Nairobi_Kenya_29_December_2012.png"?w=310&h=233 alt="Kenyatta AvenueNairobi Kenya - 29 December 2012">

Figure1: Kenyatta Avenue, Nairobi Kenya

If you have been following my blog and social media content in the last year, it is clear by now that I am smitten with Kenya due to its ground-breaking ICT sector developments that are spear-headed by mobile technology. I even have a Kenyan mobile number for good measure (•‿•). In this post I shall highlight, yet again, why my love for Kenya is not without sound reason for a self-proclaimed South African-based infopreneur who uses more than 20 gigs of data a month.

I am currently on holiday in Nairobi, the Kenyan capital. On landing at the Jomo Kenyata International Airport (JKIA) several days ago, I needed to load my Safaricom SIM with data, so I headed to the airport booth of Kenya’s largest mobile operator where I was handed a brochure to browse through for available data packages and associated standard prices.

Safaricom Data Brochure - December 2012

Figure 2: Safaricom Data Brochure – December 2012 (click to enlarge)

First thing that caught my attention in Figure 2 was how clear and simple the data bundles on offer are: no differential rates for pre-paid vs post-paid, nor for standard vs advanced bundles. This made information in the brochure easy to use for making a quick decision. I would fall in the HEAVY USER Category normally. However, most accommodation places in Nairobi – including the one I stay at – have complimentary Wi-Fi, and my stay in this beautiful cosmopolitan African city ends in the next few days. So, I opted to buy a 10MB daily Internet bundle.

<img src=http://"Safaricom_Daily_Data_Bundles_Dec_2012.jpg"?w=812 alt="Safaricom Daily Data Bundles Dec 2012">

Figure 3: Safaricom Daily Internet Bundles

Naturally, I was curious to see if there has been any change in data costs between Kenya and South Africa since I published the first post on this subject in October 2011.

Related post: Part 1: Why are broadband prices so high in South Africa compared to Kenya?

In order to compare apples with apples while keeping the exercise simple, I chose Vodacom again as a South African proxy. The rationale for my choice in both Part 1 and Part 2 is that both mobile operators are leaders in their respective home bases by market share size, and Vodafone owns substantial stakes in both of them. A detailed spreadsheet analysis of Part 1 can be found on this link.

First, let’s level the ZAR/KSHS currency exchange playing field:

ZA Rand/Kenyan Shilling Exchange Rate - 31 Dec 2012

Figure 4: ZA Rand/Kenyan Shilling Exchange Rate – 31 Dec 2012

Note that Kenyan Shilling’s value was weaker (at ZAR1 =  KSHS12,38) when I published Part 1 14 months ago.

ANALYSIS AND FINDINGS

Kenya’s smallest data bundle, the 5MB in Figure 2, costs 1 Kenyan Shilling per MB. According to Vodacom’s official site, the smallest data bundle on offer in South Africa is 10MB and it costs R9, or ZAR0,90/MB.

Vodacom smallest data package - 31 December 2012

Figure 5: Vodacom smallest data package – 31 December 2012

The trend in both countries – and probably many others – has been that smallest data bundles are the most expensive on a per MB basis. However, comparison of the two countries, using ZAR as a base, indicates that 1 MB costs roughly 10 cents in Kenya (Figure 2) and 90 cents in South Africa (Figure 5). Put differently, South Africa’s lowest data bundle is 9 folds more expensive than Kenya’s!

A look at cheaper data packages for both countries reveals a similar picture. Kenya’s 25GB data bundle (Figure 2) costs 11,499 Shillings (or 4.5 cents/MB in South African currency); while South Africas’s 20GB Standard bundle (Figure 6) costs up to ZAR3,199 (or 16 cents/MB in South African currency).

<img src=http://"Vodacom_20_gig_data_cost_Dec_2012.png"?w=504&h=59 alt="Vodacom 20 gig data cost Dec 2012">

Figure 6: Vodacom’s 20 largest data package – Dec 2012

Clearly, it is cheaper to buy the largest data bundle in both countries (for those who can afford it), but the cents/MB is still up to 3 times more expensive in South Africa! The graph in Figure 7 visualizes the cost/MB disparities more clearly.

<img src=http://"Data_Cost_Per_MB_Comparisons_for_?w=812 South_Africa_and_Kenya_30_Dec_2012.png" alt="Data Cost Per MB Comparisons for South Africa and Kenya - 30 Dec 2012">

Figure 7: Data Cost Per MB Comparisons

In essence, those who cannot afford to buy large data bundles pay more per MB. Even worse, South Africans buying small data bundles pay a SUPER PREMIUM compared to their fellow Kenyans.

QUOTABLE QUOTES

A quote from the Africa Business Magazine of August 2012, found in Kenya’s The Standard newspaper of Sunday the 30th of December 2012, explains why the ICT sector – which includes mobile technology – is important to Kenya’s economy and standing:

Quote from African Business Magazine - July 2012

FIGURE 8: Quote from Africa Business Magazine – July 2012

A quote from The Economist, also found in The Standard, explains how Kenya got the ICT sector moving in the right direction:

<img src=http://"Kenya_ICT_The_Economist_Quote_25_Aug_2012.jpg"?w=812 alt="Kenya_ICT_The_Economist_Quote_25_Aug_2012">

FIGURE 9: The Economist – 25 Aug 2012

As The Standard puts it, increased availability of mobile bandwidth to Kenya from undersea cables made the difference:

<img src=http://"Kenya_ICT_The_Standard_Quote_30_Dec_2012.jpg"?w=310&h=223 alt="Kenya ICT - Quote from The Standard 30 Dec 2012">

FIGURE 10: The Standard – 30/12/12

$1MILLION QUESTION

South Africa has been among the front-runners in the continent in getting access to the undersea bandwidth cables. And, as per the most updated undersea cable map of Africa, the country measures well against Kenya in the number of cables accessed.

Question that continues to linger on in my mind is: why are Mzansi‘s netizens paying so much more for data?

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5 thoughts on “Part 2: Why are broadband prices so high in South Africa compared to Kenya?

  1. Very enlightening article given that safaricom base of subscribers will hit 20m pretty soon. Kenya is leading the way in mobile applications that empowers especially the bottom and middle of the pyramid allowing them to trade and giving hope to an emerging middle class that will be key to achieving he objectives of vision 2030. The bigger question is why tariff disparities exist when the mobile service between SA and Kenya users is the same?

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