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Tackling the digital divide in South Africa

By Simon Jee Duchatelet, Investment Associate and Madeleine Eastwood, Head of Communications  |   Posted 21st December 2021

GIF is excited to announce a $460,000 investment in Isizwe, an internet service provider that offers online access to low-income communities in South Africa at a rate 20 times cheaper than the current standard.

Digital connectivity is now considered a basic human necessity as increasing numbers of public and private services are delivered online. The COVID-19 pandemic has made this even more critical with the internet being used to provide vital information and connect communities. In South Africa, despite relatively high internet coverage and access to digital devices, most people cannot afford to go online due to high data costs and lack of digital literacy.

Isizwe offers unlimited WiFi access in townships and informal settlements on a low-cost, pay-per-use basis. Users pay R5 ($0.33) for 24-hours of internet access compared to the average cost in South Africa of R100 ($6.63) per gigabyte.

To deliver the service, Isizwe builds WiFi Zones with WiFi hardware that connects to Internet Service Providers (ISPs). This enables Isizwe to provide internet access in low-income locations without having to invest in building expensive backhaul infrastructure. The result is WiFi Zones within walking distance of every home, with one WiFi Zone covering approximately 100 homes. Since launching in 2020, the team have set up 80 Wifi Zones, including zones for an education group working to facilitate remote-learning during the COVID-19 pandemic. Isizwe anticipates the roll out of more than 25,000 Wifi Zones in South Africa by 2022.

Isizwe operates a collaborative model with local communities, employing sales agents – known as ‘WiFi entrepreneurs’ – to engage with the community and generate direct sales. Isizwe also enters offtake agreements with corporate partners to sponsor WiFi access for employees, as well as students in full time education.

Through its innovative model, Isizwe empowers the underserved communities of South Africa by providing them with access to income-enhancing information, health information and an expanded social network, while saving on data costs. Studies have revealed that broadband and fast connectivity fosters economic growth through improvements in productivity and efficiency; and that information access has positive effects on welfare and well-being.

More affordable internet access can also help bridge the digital gender gap – which currently sees men as 21% more likely to be online than women globally. Digital exclusion limits the opportunities for women and girls unable to connect, however innovations like Isizwe contribute to improved gender equality by allowing them greater access to the internet, potentially enabling them to identify additional income earning activities and employment opportunities.

The public provision of WiFi as a viable, scalable business model serving bottom-of-the-pyramid customers remains unproven. However GIF’s investment at this early stage will help de-risk Isizwe’s model and potentially catalyse commercial capital in subsequent investment rounds to enable the company to test core assumptions around operational, social, and financial viability.

For GIF this investment is made under ADVANCE, our partnership with Anglo American which provides a way to unlock private sector investment needed to scale new business models for the UN Sustainable Development Goals, which present new market opportunities and new jobs. Digital connectivity is a priority area for Anglo American, particularly as an enabler to help mining communities in South Africa establish alternative livelihoods and sources of income in the wake of mine closures.

Tim Genders, Isizwe Chief Executive Officer, said: “This is a great investment for Isizwe and shows us that the world really cares about connectivity in Africa. Over 90% of homes in Africa only have mobile data as the way of connecting to the internet – this is on a per gigabyte billing basis, so it is incredibly expensive to connect. The cost is similar to the cost of bathing in bottled water. Governments in developed countries understand the dangers of a digital divide and give significant investment to connect their rural communities. Connectivity is the new key to unlock the poverty trap, so it is great to see GIF and Anglo American applying this to Africa.”

GIF Investment Director Khuram Hussain said: “We have seen the benefits of last-mile connectivity in India, Latin America, and parts of Africa, and aim to show that our investment can sustainably provide internet access to those living in South Africa’s rural and peri-urban areas, while generating both large-scale social benefits for users and attractive financial returns for investors.”

Matthew Chadwick, Head of Socio-Economic Development and Partnerships for Anglo American, said “We have been aware of the importance of, and implementing ways to improve, connectivity in the more rural areas even before the pandemic but COVID has made it a much more pressing issue to seek to resolve. Isizwe offers an affordable, sustainable way to deliver this connectivity and we are excited to see a portion of our ADVANCE funding going to support them as they expand in South Africa. We continue to look at ways and partnerships to improve connectivity in all of our host regions.”