E-Commerce Green Paper: Reaping the rewards

The final two chapters of the E-Commerce Green Paper address two very important issues, those being the potential impact of e-commerce on the socio-economic circumstances of all South Africans, and the development of electronic government.

The paper notes that: "The positive effects of the Internet permeate every aspect of society...with a common outlook for development and growth." It says that big business has been the biggest beneficiary to date, and that "there is a need to extend such benefits to communities and previously disadvantaged individuals as well, through appropriate policy measures."

The chapter addressing the potential for e-commerce in government is aimed at highlighting the challenges involved in turning the government into a model user of e-commerce, and aims - in remarkably few pages - to raise issues around the development of a comprehensive e-government strategy.

According to Mike Lamb, chairman of the E-Commerce Association of South Africa (ECASA), the ability of e-commerce to lower the cost of, for example, financial services to the hitherto marginalised and unbanked masses has yet to be proven. "What e-commerce gives you is an alternative delivery mechanism, a means to lower the cost of transactions, possibly, but there are still the added components of backward integration into legacy systems, and those costs will certainly need to be offset against transaction revenues. So I wouldn`t say it necessarily follows."

The cost to the consumer of even electronic transactions are still expensive.

Suleiman Patel, e-government expert, Wits

Suleiman Patel is an e-government expert at the LINK (Learning, Information, Networking and Knowledge) Centre at the Wits School of Public and Development Management. Patel points out that while e-commerce can lower the cost of transactions, most private institutions, like banks, generate a fair amount of income from their transactions in terms of fees.

"You will see a reduction in cost," says Patel. "But the cost to the consumer of even electronic transactions are still expensive. Banks are using electronic transactions as a new way of generating income. As much as people say that there would be financial benefit, I don`t think it will be that marked."

Piet van der Merwe, a public sector expert at Accenture, is much more positive about the prospects. "If you talk about the unbanked, what seems to be happening is they are getting into smart card-based things," he says. "Sasol is running an initiative piloting in Secunda, using smart card technology. So they`re turning a smart card system into a payroll system. Salaries are paid through the smart cards, and the smart cards become the e-purse, the cash. All they have to do then is upgrade the ATMs and POS."

He explains: "What this does is bring the unbanked into a sort of a banked environment. It takes the need for cash away, and it`s not costing the guy with the cash, because he`s been given the smart card in return for loyalty. The cost may be elsewhere, but it`s where it can be afforded. I believe there are large inefficiencies inside the big corporations that can be squeezed out, and they have the money to do so, and then redirect the savings back to the unbanked. So e-commerce will make a big difference."

We`re looking at it the wrong way if we think e-commerce is going to be a universal panacea.

Mike Lamb, chairman, ECASA

PricewaterhouseCooper`s Doug Franke reinforces the view that bringing the benefits of e-commerce to the masses is a competitive issue, rather than a technology issue. He points out that in the rest of the world, certain services, like stock trading, have indeed become more accessible and less expensive to the man in the street.

"But," suggests Lamb, "we`re looking at it the wrong way if we think e-commerce is going to be a universal panacea. We first of all need to do e-commerce to realise the savings and efficiencies, and then incorporate the SMEs and the individuals into the process through government or joint government and private sector initiatives."

Most commentators support the view that government intervention in the area of e-commerce should be light and targeted at legal obstacles, rather than at a creating a comprehensive and potentially limiting policy.

"My concern is that the government sees e-commerce as something in and of itself," says Franke. "It`s merely a tool, a new channel to reach you, me and every other citizen. Just like a cellphone. If you think about it, we don`t regulate cellphones other than at telco level."

Whether government policy will benefit or hinder business in the adoption of e-commerce depends on its footprint, according to Lamb. "If it`s a delicate footprint, as is the recommendation of the OECD, then it is possible that the benefits and objectives can be achieved."

Some of the policy questions fuel the fears: "How successful are South African firms in creating and meeting the demand for local and international online goods and services, and how should companies position themselves to capture a growing share in this expanding market?"

While regulation should not be overbearing, and should enable and free businesses rather than restrict them, it has to do a few things, according to Franke: "It should follow internationally accepted guidelines in protecting South African consumers; it should enable South African business to compete internationally; and then get out of the way."

He uses a sports analogy: "SA didn`t write the rules of rugby. All we do is make sure that when the Springboks go out there they have all the members on the field, they know the rules, so we can compete on equal footing. The rest is up to the coach and the team. With e-commerce it`s the same thing. The government may be a little preoccupied, thinking, `We`re going to define the size of the field, the colour of the ball, the length of play.` That doesn`t matter. As long as our team, South Africa Inc and its people, understand the rules that everyone needs to play by, they get out there and fight for themselves."

Public-private partnerships (PPPs) are universally seen as a mechanism with huge potential, in many regards. "Government acknowledges," the paper states, "the leading role of the private sector in implementing e-commerce in terms of applications." It views partnerships as key to creating the enabling environment necessary for the growth and implementation of e-commerce.

E-commerce is about ten smaller guys doing things together and making it smarter.

Piet van der Merwe, public sector expert, Accenture

Van der Merwe says: "E-commerce is about alliances and partnerships. It`s not about big conglomerates, it`s about ten smaller guys doing things together and making it smarter. That`s what PPPs are for - allowing government a mechanism to bring companies quickly to the table in a regulated environment with accepted guidelines and it allows venture capitalists and entrepreneurs and government to meet and share. This contrasts with the historical tender situation, where big tenders require big responses, and it takes months and years. If you establish a PPP everything happens inside the PPP."

He also believes that PPPs are a great way to promote the development of SMEs and of achieving black economic empowerment. "Because it`s a consortium, and because when you call for the PPP, you can specify that 30% or 40% or 50% of the revenue in that PPP will go to SMEs, otherwise it`s a no-go. 50% of the ownership in that new vehicle will be black. You can put those requirements on it."

While some point to the substantial potential for directing business where it is most needed - like the SME sector - others approach the idea with a healthy scepticism.

"I think e-commerce is largely going to be a business initiative," says Lamb. "This applies to the private sector, and it equally applies to government. Those partnerships that are under consideration are merely are an extension of corporate social responsibility. They have to be economically viable in the first instance, before they can start benefiting the economically disadvantaged. If they don`t surpass the first criterion, it`s a matter of non-delivery later on."

He does, however, agree that corporate SA is being responsible in trying to share big contracts at the moment. He points to the National Product Data Catalogue: "There, the entry costs are very low, so there`s no financial barrier to entry, and the benefit to the smaller player is that his products are immediately visible to the large retail outlets. So through e-commerce, he`s getting a wider audience."

One might expect that the promotion of PPPs - both in terms of reaping the economic benefits of e-commerce, and in establishing the processes and structures required for e-government, will be emphasised strongly in any private sector response to the Green Paper. As both international and local experience has shown, these partnerships have the power to achieve multiple objectives: ensure efficient project implementation, generate business where it is most needed, promote equality and empowerment of previously disadvantaged sectors of society, and achieve goals that would have been far more difficult had the government tried to do on its own.

An understandable concern of government is the need for investment and funding for e-commerce initiatives. While it is raised as an issue for policy consideration in the Green Paper, few people seem very concerned, or even see it as a problem.

Van der Merwe: "How can e-commerce initiatives be funded other than by government itself? Well, you go into these PPPs and you allow the private sector to make money. All you need to do is find the right PPP balance. If you can improve UIF intake, fine, you can take a cut of it.

I don`t think we`ve really scratched deep enough yet to find really innovative solutions.

Piet van der Merwe, public sector expert, Accenture

"That`s the way SARS is doing it with the mytax.com business. They`re saying: `I will delay payments due to me by five days, and you can play with that interest.` Interest on a R200 billion bill is significant money to play with. So there are ways and means to overcome the funding issue. And I think the way SARS is putting together this whole electronic tax submission deal is pretty smart. All you have to do is play with the payment period, and the money is there to pay it. Better still, with the old system, SARS had a 10-day window, so both sides gain.

"I don`t think we`ve really scratched deep enough yet to find really innovative solutions, but you need these PPPs. Fortunately the guidelines are there and people are beginning to dabble in it. And they`re pretty open-minded about it."

He mentions another example: "The procurement process in government is hugely inefficient. We`ve all done the investigations, we`ve all got the facts. We`ve worked on a conservative business case for procurement reform. Trevor Manuel talks about a goods and services procurement bill of R80 billion per year. I believe it`s R40 billion, but I think the difference is that he includes the parastatals and I talk only about national and provincial governments. But let`s assume a conservative R40 billion. If you can get a 2% to 5% efficiency improvement, you can use that money to fund the e-initiatives, give tax cuts or build houses."

Foreign aid monies are another good source of development capital for e-commerce initiatives, according to PwC`s Franke. "The Internet and e-business are sexy. It`s an easy sell for development agencies back to their taxpayers.

"Good examples would be the Swedish International Development Agency (SIDA), or its Canadian counterpart, CIDA. Globally, developed countries give around 0.75% of their budgets to development aid. This is billions of dollars worth of aid. An agency gets its funds, and looks for projects with which it can assist developing-world governments.

"And SA is a popular target for such assistance. They allocate chunks of money, and look for projects where they can have a meaningful impact, and where politically they can show smiling faces and success to their taxpayers back home. So you have the overseas agency, the local government project, and a private sector contractor. It takes all three sides to make this work.

"Because of corruption and other problems, more and more of this money has been going to general budget support. It takes much more effort to manage 200 projects of $500 000, than to write a single cheque for $100 million and give it to the government. So they`re looking for very specific smaller projects where they can show a success, and also where they can take sole credit and responsibility for the project," he says.

"Kader Asmal did very well with water projects, getting foreign donors to pay for these projects, take responsibility, achieve results, and have people here compete very strongly for the implementation of these projects. This can happen in e-health, e-government, and so on, at the smaller project level. And because they`re smaller projects, smaller companies can more easily get involved."

He emphasises that the success in the PPP area will be bottom-up, rather than through a government-driven top-down policy approach.

The Green Paper on E-Commerce, naturally, raises the need for e-government. Making the government more accessible to citizens, streamlining its processes to drive out costs and generally making it easier and quicker to deliver services is a goal that - on the surface, at least - is taken seriously.

However, for all the lip-service, e-government receives only a five-page chapter at the end of the Green Paper.

Patel believes that this is a serious shortcoming. "E-commerce is not just going online and submitting your tax returns. There needs to be an e-process behind this, and this is what the document doesn`t address. It is not service-delivery focused. You cannot take technology and put it onto rotten processes and expect a miracle."

Ernst & Young e-business analyst, Mike Lalor, agrees: "I think the government does have a key role to play in terms of facilitating collaboration, but as far as e-government goes, although tech solutions are obviously important, there has to be a realisation that there has to be a focus on people and processes first. Technology is not a cure-all, and one can`t throw technology at it and expect change. Without quite significant change management, not much is going to change."

Says Patel: "Structurally, there is large-scale duplication of effort. Why can`t I pay my rates and taxes at the same place where I apply for a marriage certificate or my home loan? Why, if someone commits a crime in one place, and gets stopped for a traffic fine three blocks down the road, isn`t the traffic officer aware that he`s ticketing a fugitive from the SAPS?"

Van der Merwe believes that integration will come in due course. "The way the disparate initiatives in the various departments will be combined into a coherent strategy is through the appointment of the new CIO, reporting to the Department of Public Services Administration (DPSA), who`s responsible for internal government information systems and policy-making. DPSA is the policy-making body for government IT. And SITA is the delivery arm of that policy through all the other departments.

"This CIO`s job is to coordinate and put the strategy together. He has a body called the GITO Council (Government IT Officers` Council), which cuts across all departments, trying to coordinate IT issues. That will drive it into the future. But then again, that will be a slow decision-making body and process. You don`t want individual departments to hold back on their electronic service delivery initiatives. Let them go ahead, and try to coordinate as much as possible without stifling."

He points out that many government departments are moving on e-commerce. "Labour has tendered to revamp their IT layer completely through a PPP arrangement. SARS is moving. The National Treasury is moving, through the procurement reform and the proof-of-concepts Accenture is doing at the Department of Trade and Industry. We`ve already gone from mere Web sites to online forms, and the logical next step is to go to online transactions."

But Patel is much more critical. "We should look at e-government as a new way of thinking in terms of the structures of government. This is what the Green Paper doesn`t address. The constitution quite clearly says that there will be three tiers of government - national, provincial and local. Each department and each level of government has set responsibilities prescribed by the constitution.

"Ten years ago when the constitution was being developed, we already raised concerns that technology would cut through traditional man-made boundaries. But at the time, only political issues were being considered, and technology issues were ignored - even as companies were starting to implement ICTs [information and communication technologies] to re-engineer their own business processes."

Government, in Patel`s opinion, should be enabled to flatten its management and operational infrastructure in the same way that ICTs have enabled companies to do so. "There needs to be a re-engineering process that asks whether there still should be three tiers of government - and this is my problem, because those tiers are enshrined in the constitution. E-government and the constitution are not in synch."

The vision of the future, according to Patel, is one where a citizen has a single point of contact for obtaining services from government - and government in turn has the structures and processes in place that can efficiently deliver these services.

The problem that government operates in vertical channels is visible in the fact that the Green Paper on E-Commerce is issued by the Department of Communications. Many feel that a large share of the issues it addresses rightly should be handled by different departments.

The Department of Finance should address the tax implications. The Department of Trade and Industry might have economic development of SMEs at heart. The Department of Public Service Administration should probably consider e-government its domain. Certainly steps have been taken to create IT strategies and implementation that cut across departmental boundaries, including the appointment by the DPSA of a CIO. Yet, the primary champion of e-commerce policy is the director-general of the Department of Communications (DoC), Andile Ncgaba.

Patel believes that the lack of a single vision for where the government wants to be in five, ten or twenty years, and the lack of a suitable driver is a problem.

"There`s nothing unusual about the government`s disparate initiatives," says Lalor. "That happens even in medium-sized companies. But there`s obvious benefit to be derived from an overall strategy. They need a team that can operate across the various departments. It`s a hugely political issue. There aren`t easy answers for that. You see it in every business, including our own. The only way to point the government forward is to appoint a cross-departmental policy team with authority."

In many other countries, the drive for e-commerce is sponsored at presidential or prime ministerial level. "It is common in other countries to see the champion of e-commerce to be the DTI. We have a driver in the person of the DG of the DoC, which is essentially a department responsible for infrastructure. But one can also argue that having any champion - even in the wrong place - is better than having no champion. I would be delighted if it were the chief executive, because that is a signal to the participants that this is a high priority."

The Green Paper - while admitting that government needs to play a catch-up role - suggests that it should "take the reins and lead the charge with respect to the deployment of ICTs and e-commerce into its business practices". This vision of government leadership, while meritorious, is not widely seen as achievable or even desirable.

Lamb: "You can lead and get out of control in the front. What we want to be is fast followers of international best practices. We simply don`t have the government or private sector resources to go in front."

A fear among almost all the observers and participants in the policy process is that their views will not be taken into account when government policy is formulated. Although both the minister of communications and the director-general have repeatedly assured stakeholders that their views will indeed be considered, the process is a far cry from international best practice.

Lamb notes that when one looks at the development of the Green Paper, over a period of 16 months, from the original discussion document released in July 1999, there is no reference to the amazing, no-charge consulting input from the working groups.

In the US, for example, a recent policy process attracted 52 000 responses from interested parties. Each of these responses received a written response and each decision was justified in writing, by a team of 700 people assembled by the US government.

While this process took ten months, the DoC expects to release a White Paper on E-Commerce in the second quarter of this year.

Many participants and stakeholders applaud the urgency behind the process. But serious concerns - and bad experiences in the past, particularly with the passing of the Telecommunications Act of 1996 - have prompted organisations like ECASA, which with KPMG is facilitating a detailed private sector response to the Green Paper, to make it clear that this response will be circulated not only among local media, but also among interested international governments and organisations.

According to Lamb, the intention is to hold government accountable for the policy it creates, and avoid the repeat of a process in which mere lip-service to transparency created a policy and regulatory situation that has done the South African economy and civil society more harm than good.

Featured companies:
Accenture - Business consulting firm

ECASA - E-Commerce Association of South Africa

Ernst & Young - Business consulting firm

KPMG - Business consulting firm

PricewaterhouseCoopers - Business consulting company

Wits School of Public and Development Management

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