Satellite internet provider Starlink supports communications minister Solly Malatsi’s move to issue a directive that would enable foreign telecom operators to enter the SA market using a different set of empowerment rules.
This is according to a submission made by Starlink’s parent company, SpaceX, to the department of communications & digital technologies that Business Day is in possession of.
In May Malatsi gazetted a policy directive on the role of equity equivalent investment programmes (EEIPs) in the information and communication technology (ICT) sector “as a mechanism to accelerate broadband access”.
Since then, Malatsi has been under fire over the move, largely seen as a way to allow Elon Musk’s company to operate in SA without having to give equity in terms of BEE.
The rules governing who can acquire a licence to provide electronic communications services or to operate a network require a minimum of 30% of shares to be in the hands of historically disadvantaged individuals.
In the submission, senior director for Starlink market access Ryan Goodnight said the company welcomed the minister’s directive, arguing that there was misalignment between the different laws governing telecom operators in SA regarding the issue of empowerment and ownership.
“Icasa’s regulations significantly differ from those of the ICT sector code, notwithstanding that a person who seeks to hold licences from Icasa and operate in the ICT sector would be bound by both instruments.”
It makes sense that SpaceX and Starlink support Malatsi’s move. SA-born Musk’s biggest gripe with BEE laws is having to give up a portion of his operation in the country, insisting he will not abide by this clause.
EEIPs allow qualifying multinationals to meet empowerment obligations through alternatives to 30% ownership, “such as investing in local suppliers, enterprise and skills development, job creation, infrastructure support, research and innovation, digital inclusion initiatives and funding for SMMEs”.
While the requirement for licence holders to be South African or registered in the country and level 4 BBBEE contributor status are aligned with the specific requirements of the Electronic Communications Act (ECA) and the ICT sector code, “the ownership requirement has been adopted by Icasa in an extremely conservative and restrictive manner”, said SpaceX.
Specifically, “SpaceX understands that the ECA grants Icasa the discretion to either impose the ownership requirement on licensees or to adopt an alternative mechanism that seeks to achieve a similar end result” that is, the transformation of the ICT sector.
According to the company’s interpretation, section 9 of the ECA provides that Icasa must include equity ownership requirements “or such other conditions or higher percentage as may be prescribed under section 4(3)(k) of the Icasa Act”.
“The plain meaning of this section is that Icasa has an election whether to impose the ownership requirement or such other conditions,” said the US-based space exploration group.
SA’s existing telecom operators have said they have no problem with new entrants in the market as long as the same rules apply to all players.
Starlink understands that any requirements in Icasa’s regulations that deviate from the ICT sector code potentially contravene the provisions of the BBBEE Act (in so far as these apply to the determination of qualification criteria for the issuing of licensing) as well as the requirements of the Icasa Act.
Moreover, “it is simply not desirable to create parallel legal regimes when harmonisation is both legally required and practically beneficial. Put differently, by imposing the ownership requirement in such a conservative manner, Icasa has seemingly failed to incorporate those provisions of the ICT sector code in a manner that it is required to do so.”
While wiggle room has now been created over ownership, the question is whether SA’s government will make further concessions to attract the sought-after foreign investment. In a highly regulated industry such as telecommunications, such allowances are likely to be seen as giving unfair advantages.
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