MzansiSat is one of Africa’s private prospective satellite operator focusing on telecommunications. With a focus on the South African market, the company aims to deploy Geostationary Orbit (GEO) satellites by working with the governments in the SADC region, with the goal to provide reliable and affordable internet connectivity everywhere by 2025.
Space in Africa spoke to Victor Stephanopoli, chairman of the Board at MzansiSat, where he explained the company’s unique approach to the delivery of satellite-based connectivity to the African masses.
Below is the Q&A
MzansiSat is one of the few companies looking to own and operate a broadband satellite. How is this market so far?
In an African context specifically, COVID has just overrated the challenges we are experiencing on a daily basis with our infrastructure, and this is not only rail and road, but it is also telecom and other public facilities. We have observed that everybody is online, more than ever, and that creates a squeeze that can be felt very strongly across the SADC. The regulators tried to push as much capacity as possible into South Africa. In contrast, all the countries which were trying to draw capabilities in the spectrum, undersea cables, were throttled. So South Africa could stay above the waterline as far as its communication speeds were concerned. So using this as a use case, albeit all the decision-makers, we feel that policymakers may still not have understood what is going on. The need for reliable and affordable telecoms networks is there, everybody wants it, and everybody needs it. I am yet to meet somebody, telling me that they do not need faster internet from this part of the world.
It is a rare commodity, and at the latest since COVID 19, the connectivity to the internet is akin to another public utility such as clean running water and electricity. I have met many people who said, ‘Before I can eat or sleep, I need internet,’ because the connectivity creates parts of the backbone that enables people to engage in meaningful economic activities and job creation. In a nutshell, Africa’s satellite industry is not doing much because we do not have many African telecoms satellites. I think it makes a solid case that we need to get into gear and start moving to provide what people need. We are in one of those infrequent situations where the customers and stakeholders’ needs and wants are perfectly aligned, and this is where we can push a lot of innovation very quickly.
When it comes to upstream in the African context, it is very hard to attract investors. In an earlier interview, you mentioned banks would be your go-to investor because of the long term cash flows. Please tell more about this.
As MzansiSat, we have chosen to be accountable to the client / the off-taker from a very early stage. Looking at Africa, and then the reality of the market, the GDP and per capita spending is much lower than Europe, North America or the other traditional markets.
Having said that, there are two ways we can run MzansiSat. The first way is that we are indeed going for Venture Capital and Private Equity investments and pulling in funding. But just because we have money in our account doesn’t mean we have a good business case. Developed nations can put in the capital for an okay business plan and if it works, well, if not, fine. But that is not how we are running MzansiSat, especially given its African context. We are actively talking about taking out loans and engaging banks and devising a very, let’s say, boring way of financing and running our organization. And this is okay because as long as much of the money stays in the local economy, which also happens to be the economy that we are trying to supply with our spectrum, we can focus on the service/product, and not the needs or wants of shareholders; perhaps sitting abroad and having a very different or unrealistic use of the African reality. So having creditors and debtors in a business relationship, makes more sense for the MzansiSat business model. The entity that provides the loans will always get paid first, which forces the company to great fiscal discipline. And the shareholders, which we are, are keen to make decisions best to develop the company and not cater to foreign investors’ needs, who only see the bottom line. We are in this for a very long time, looking to build infrastructure and a backbone that the SADC can rely on.
If am analyzing your business model correctly, you will require much engagement with public stakeholders, from SANSA, the Communications Authority, Infrastructure developers among others. Do you have strong relationships here and how are you leveraging them?
I think the conversations we are having with SANSA are good, but at the end of the day, it does not stop with SANSA. Before we can proceed, however, we need to have tenders on the table. The cabinet has a lot to decide; our ministers need to develop measurable KPIs and deliverables that a national communications satellite needs to have. We are talking about remote healthcare, education, defence and security cluster considerations. After the cabinet deliberates on this, they will send the mission profile to SANSA, in which case, the agency will deconstruct the paper to create a specs list; the payload, spectral capacity, etcetera. When the specs list is complete, the South African cabinet will open a tender or commission a public entity. This is where MzaniSat comes in by going to tender. Essentially, we are pushing a South African agenda. So yes, we are having a good conversation with SANSA. They agree that we need to take pride in our infrastructure and the good that satellites can do for our economy. We need not forget that South African technology is already in space.
SANSA just received funding for the construction of the Space Infrastructure Hub. Do you see MzansiSat benefiting from its development?
I am sitting on the Space Infrastructure Hub sub-committee and presiding over the stream of local benefaction. I am all about identifying and promoting the South African Industry and companies and how we, specifically in Space & Aerospace cluster, can compete internationally. The South African market is highly specialized. There is very little competition between South African companies in the space sector because we are also diversified. Therefore, I think the funding into the SIH is an excellent idea. There is a lot of energy and keenness to get this going. However, by sitting on these committees, we are only there to make recommendations to SANSA. In turn, SANSA will take the recommendations to the government, and hope that the government will listen. I think the funding was way overdue, and if we want to go to space or remain in space, this cannot be a one-time paycheck. There needs to be a continuous cyclical commitment to the South African Space sector, an offshoot of the Aerospace sector. The lines are blurry in this area, with regard to the defence industry.
Are you looking to construct a purely South African satellite?
We are not going to build a 100% South African satellite. The space sector has been weakened to the extent that we can hypothetically build an entirely South African satellite. Still, globally, trust is not given. There is no proof of concept as we do not have a purely South African built satellite. The last satellite to be launched by South Africa was SanSat, which is an earth observation satellite. We are talking about a Communications satellite, which means it is an entirely different ballpark. The conventions of engineering and geostationary satellites, regardless of what the mission is, are very different from what South Africa currently specializes in, which is low earth and medium earth orbit.
We are going to place as much South African IP and components in the satellite. However, we will outsource other areas to a reputable European and North American company. The final assembly will have to have a lot of experience and credibility because we will still be going back to banks which are also in the business of risk reduction. It is much easier to finance a project with a proven product and technology that has worked for the last 50 years, rather than re-inventing the wheel.
Despite the pandemic, companies like Alphabet, OneWeb, SpaceX are promising to dominate the global broadband market, with a heavy emphasis on Africa. Alphabet, especially, launched several projects on the continent this year. You mentioned how difficult it would be to justify their unit economics for providing these services in a recent podcast. However, some are partnering with governments by incorporating some subsidized type of offer. What is your stand on this?
I am not sure many people would pay USD 80 a month for internet connection, not even in South Africa. People do not care how they get their connection; they care how affordable it is. The teams at Starlink and the rest have the right product. But there are two assumptions; the first assumption is that African countries are not as industrialized as the United States and will never be able to pull off their own space systems. So they are hedging a bet towards, “they can’t do it anyway, so they will have to buy our service” It is flat out too expensive. Take South Africa for example, an internet connection for Rand 1,400 is hardly sellable. We are not even talking about the hardware needed to install it, which is about Rand 6,000-7,000. So everybody may want Starlink, but nobody will want to pay for it.
They have excellent products, despite all the regulatory challenges involved in having, say around 40,000 satellites in orbit. We ought to consider whom we are serving and create a pricing structure that allows everybody to connect. We will not be selling directly to the consumers because it requires licensing we do not have and do not need. Why? We do not have the experience to do so, to begin with. Our expertise is in space and satellite telecommunications, not in terrestrial final-mile spectrum delivery. So, we need to talk to the local stakeholders end even smaller companies such as Rain, Web Africa, and any company with a mandate and a license to provide spectrum to a community but do not have enough spectrum coming into the country.
We also need to think about what happens when suddenly everybody decides to connect to a foreign provider. It is a massive capital outflow.
We indirectly pay taxes on subsidized services, which then pay foreign companies to enable service delivery at a subsidized cost. It is still an outflow because both way, we are paying for it, and worse, it is going to foreign companies. That is the cost of convenient deals. We must take the normal calculated risk route and build our infrastructure. It might take a while, and we will not get rid of the competition immediately, but we will have ours at the end of the day. At some point, we must think about our infrastructure because it doesn’t matter what company is propping up, we already paid for it.
How did COVID 19 impact MzansiSat?
From a structural point of view, nothing changed. We run a decentralized team, so some of the changes we had were on reduced travel.
What other challenges did you face?
We are running a startup, so nothing that would make headlines except that we need government support. The need to have our infrastructure is essential now more than ever. Still, our administration is not doing much, so I think there is a massive regulatory letdown.
What should the industry anticipate from MzansiSat in 2021?
We are not just working on the notion of universal connectivity across SADC. We have also been talking about Ku & C bands, stable internet everywhere. 2021 might be the year we do precisely that, just faster, where we can also provide higher bandwidths and faster speeds. This is what we are working on at the moment.
Do you have plans to expand to other regions in Africa?
We want to produce something that the whole of Africa can use, but first, we would like to focus on our hometown.
Njeri graduated with a bachelor’s degree in Finance, from the University of Nairobi and is a CFA Level II Candidate. Currently an analyst at Space in Africa, her experience spans across Project Finance, and the analysis of Venture Capital & Private Equity Ecosystems in sub-Sahara Africa, with a particular interest in Sustainable Sciences.