JORDAN GRIFFITHS: Malatsi’s directive targets crony capitalism and elite BEE deals

Communications minister Solly Malatsi’s recent policy directive strikes at the core of a growing economic debate in SA: the role of BEE, the legislation that underpins it and the country’s urgent need to attract investment. In doing so the minister has taken a bold stance against entrenched crony capitalism, where BEE has too often been reduced to behind-the-scenes deals that benefit a politically connected elite, leaving ordinary South Africans behind. 

Last week Malatsi issued a directive to the Independent Communications Authority of SA (Icasa), challenging the longstanding requirement that companies must ensure at least 30% equity is in the hands of historically disadvantaged individuals to qualify for an individual electronic communications licence, as stipulated in section 9(2)(b) of the Electronic Communications Act. 

Malatsi highlighted that a 2014 amendment to the act introduced the phrase “or such other conditions”, which he interprets as allowing for alternative compliance mechanisms — not necessarily only equity transfer. This opens the door for companies to operate in SA by meeting other transformation conditions, without being forced to relinquish ownership.

This article will not seek to engage on the legal merits of this matter, which has already been debated at length by others. The crux of this article is to focus on the principle of what Malatsi has done and why that is so important. 

The timing of this announcement — shortly after a meeting between presidents Ramaphosa and Trump — has led some to speculate that it was a response to Elon Musk’s criticism of SA’s BEE laws, particularly his claim that Starlink cannot operate in the country because he "is not black”. Critics have accused the minister of “selling out” or bypassing legal hurdles, often without engaging with the substance of his proposal. 

At the heart of Malatsi’s directive is a challenge to the status quo: questioning whether forced equity transfers truly serve the broader public interest. Under the current model companies often partner with the same politically connected individuals or consortia that have previously benefited from BEE. These individuals may buy into the deal using existing wealth or receive dividends to cover their share, securing the 30% requirement on paper while the real economic benefit remains concentrated. 

The key question is: do ordinary South Africans benefit from these transactions? In many cases the answer is no. Wealth remains locked within a tight circle, and the broader goals of empowerment and inclusion are sidelined. Malatsi’s alternative approach proposes that companies could instead meet transformation goals through skills development and socio-economic investment. These include the following: funding learnerships, internships and apprenticeships ; offering bursaries and adult education; or investing in community development — healthcare, education, arts, sports, and civil society initiatives. 

A compelling example is the Absa Group CSI Trust, which uses dividends from a BEE transaction to fund long-term, sustainable community development, focusing on education and youth employability for black South Africans. 

It is therefore surprising that some commentators have rushed to condemn Malatsi, ignoring the fact that many successful BEE models already prioritise development over ownership. When comparing forced equity transfers to meaningful investment in people and communities the latter arguably offers a more tangible and lasting effect on the lives of South Africans.

The minister has re-opened a critical economic debate, which must be continued and is by no means new. Commentators such as Moeletsi Mbeki, Prince Mashele, William Gumede and many others have over the years expressed the same critique of BEE, namely that it has benefited a small political elite at the expense of much of the rest of the population, and economic growth. 

Malatsi’s proposal may well encounter legal and political challenges, but it represents a bold and necessary rethink of how SA can achieve inclusive growth. If successful, it could mark a turning point in the fight against crony capitalism and the misuse of BEE for elite enrichment.

It could also ultimately lead to more foreign direct investment into the country, a more competitive digital communications space and better pricing and value for money for South Africans in their spending on data and internet services. 

• Griffiths is private secretary and adviser to deputy finance minister Ashor Sarupen.