High data costs lock Ugandans out of digital economy

A woman types on a keyboard. A UCC 2021 report reveals that over 200,000 smartphones were added within the quarter growing from 7.9 million smartphones in December 2020 to 8.1 million in March 2021. PHOTO/EDGAR R BATTE

What you need to know:

  • High costs. As businesses adapt to digital, data is expensive and access to devices remains a challenge. While 8.1 million Ugandans are using smartphones, the cost of these gadgets is still high.

High costs of digital devices and poor connectivity especially in most rural areas, partly explain the slow growth of the digital economy, a new Inclusive Digital Economy Scorecard reveals. 

This comes hot on the heels of Covid-19 which has disrupted our way of life with a spike in e-commerce and homeschooling among other services.

According to the scorecard, 55 per cent of Ugandans are currently digitally included, leaving out the remaining 45 per cent.But the population has been left to the vagaries of a free market economy.  

This technically means that several disadvantaged Ugandans are “locked out” of this digital economy as they cannot afford the costs of online services such as Internet data besides smartphones.

The digital economy depends on the country’s digital infrastructure which must be affordable and stable. But as more Ugandans upgrade from feature phones to smartphones, the cost of these gadgets is still high. This is worsened by expensive data. Although connectivity seems somewhat good, coverage remains limited. This, to a large extent, has an implication on the cost of doing business in the country which is already high.      

Presenting the report, Dr Francis Tusubira, an ICT sector expert, noted that government is a key player when it comes to closing the major gaps that limit smartphone ownership. The report notes that the cost of devices, especially smartphones, is still high compared with income, which keeps many out of the opportunities provided by connectivity. 

“Outside the major city centres, where real competition enables users to access data services at comparatively low costs, there is a de facto duopoly in Uganda, with usage costs relative to income being well above what is considered affordable, especially in rural areas,” reads part of the sector scorecard report released last week.  

High costs
 It emerged in the report that taxation contributes to the cost element, something that the government with a stroke of a pen can resolve.  

But that seems farfetched now, considering that after removing the regressive tax for access to over-the-top services, within no time, a 12 per cent tax on data was introduced. 

Although  it had a caveat excluding educational institutions, ICT sector experts still haven’t made sense of this regressive tax, saying it has derailed digital inclusion. 

But mobile money services, which opened the way for mass access to financial services, are also taxed.  

Underlying challenges 
The ICT sector, according to the report commissioned and supported by United Nations Capital Development Fund (UNCDF), indicates that the current state of severe understaffing, with about 45 per cent of the establishment vacant, low skill levels and underfunding of the ICT sector further undermines the penetration of digital economy. 

This is worsened by poor or even total lack of implementation of some progressive policies by the ICT sector leadership is hindering the development of an inclusive digital economy. 

For example at the national level, policy alignment is required— in this instance, an alignment of the ICT in education policy with the skills required to support the Digital Uganda Vision, but attempts to properly coordinate just this two areas remains wanting.  

According to the new Inclusive Digital Economy Scorecard for Uganda, the country still has a hard time in implementing policies to generate the expected impact of ICT on the economy.

Additionally, the dimensions that evaluate outcomes point to weaker performance, raising the question: Why is the score on policy and regulation high, yet the scores on infrastructure, skills, innovation and inclusiveness are low?

Industry numbers
Uganda Communication Commission (UCC)  Market Performance Report for 2021 indicates that the industry posted a net account addition of 590,000 mobile and fixed subscriptions. Total Revenue Earning Customers (REC) grew from 27.7 million in December 2020 to 28.3 million accounts at the end of March 2021.

This is the first time that total accounts have crossed the 28 million mark since the pre-Covid peak of March 2020. This growth in subscriptions realised in the period January to March 2021 resulted into 2 per cent quarter-on-growth - the lowest growth in the last two quarters.

The recovery in subscriptions resulted in a penetration of almost 7 lines for every 10 individuals in Uganda.

As of March 2021, broadband cellular subscriptions stand at 21.5 million, with an observed net addition of 120,000 new subscriptions.

While the quarterly net additions have not matched the more than 1 million subscriptions posted in the fourth quarter of last year, this is still noteworthy growth given the internet and social media restrictions during the period as well as the traditional network churns which usually follow the December peaks.

Smartphone usage
The report also reveals that over 200,000 smartphones were added within the quarter growing from 7.9 million smartphones in December 2020 to 8.1 million in March 2021. 

Speaking at the launch of the UNCDF report, the UCC executive director, Ms Irene Kaggwa Sewankambo, noted that the sector score card provides “feedback” on the state of the ICT sector especially on last mile connectivity, access and cost issues.

Although she couldn’t guarantee that once taxes are removed, there will be an immediate impact on cost and access of ICT related gadgets, she noted that, such issues that bedevil the sector can be sorted quickly once government ministries, departments and agencies work in collaboration rather than in silos.

She also advises that the cost of Internet can be brought down with economies of scale, giving an example of schools or institution in the same sector engaging service providers as one block to negotiate for affordable rates, a cue that other sector players can pick a leaf from. 

Guilty as charged
In a speech read on the behalf of Dr Chris Baryomunsi, the Minister of ICT and National Guidance, said despite the ever-changing technology developments, the country does lacks accurate data on digital transformation such the number of kilometres of fibre infrastructure, the number of hours saved by the citizens because of adoption of e-Government services, innovation data and the number of people employed in the ICT sector. 

“Government will therefore put in place a robust, secure system to automate data collection, processing, storage and dissemination to key stakeholders,” Mr  Kabbyanga Godfrey Baluku, the Minister of State for National Guidance said while quoting from his senior minister speech. 

He continued: “Furthermore, whereas there has been big investment in ICT by both Government and the private sector, there has been lack of harmonisation of measurements with industry indicators. 

This in part has led to Uganda being ranked unfavourably in the Global ICT Index due lack of visibility. Therefore, this scorecard comes handy in addressing this challenge.”

Uganda's ranking 
The UNCDF supported report, provides scores for the development of a digital economy based on several indicators for its main components (policy and regulation, infrastructure, innovation, and skills). It also provides scores for the inclusiveness of the digital economy for marginalised segments (rural population, women, youth, micro-, small- and medium-sized enterprises, migrants, refugees, older people and people with disabilities).

Uganda ranks 114 out of 134 economies included in the Network Readiness Index (NRI) 2020, based on performances in four different pillars, namely: technology, people, governance and impact.

The country’s main strength lies in governance, where Uganda was ranked 90th, while the greatest scope for improvement is impact, where the country was ranked 129th.  Uganda is ranked 12th in Africa, with a score above the regional average in technology and governance. 

In the 2019 edition of the Global ICT Regulatory Index, Uganda ranks 56 out of 193 countries, based on performances in four different pillars: regulatory authority, regulatory mandates, regulatory regime and competition framework (or the level of competition in the main market segments).