Elon Musk is about to find out just how much South Africa has changed since he left in 1989 to go to university in Canada, neatly avoiding mandatory service in the South African military.
And the South African government is about to discover just how different it is to deal with highly successful foreign investors, who may be pushy in their demands.
South Africa-specific regulations and the small matter of BEE are at the centre of the difficulty. Will Musk be prepared to give up 30% of his company to strangers he does not need just so his companies can operate in South Africa?
Will the South African government be prepared to waive the BEE requirement to attract the world’s richest man?
Waiving the empowerment requirement will require legislative changes and, therefore, apply to a broad swathe of operators in the telecommunications sector. It would also trigger wide eyes from other sectors, with companies demanding that BEE be ditched altogether in new or existing transactions.
In previous versions of our parliament, amending a law would ordinarily take a year or two. However, with the government of national unity, things might happen more quickly.
Ramming amendments to the Electronic Communications Act through parliament would be the easiest part. Managing the change in the political sphere would be critical, as changed approaches to empowerment would be equivalent to changing belief systems in the ANC.
It would be the beginning of planting a view of a government that wags the dog, instead of the ANC being in charge of setting policy for its employees in government. It would also matter that one of the affected ministries — telecommunications — is under the control of the DA, which opposes broad-based BEE.
The conversation between President Cyril Ramaphosa and Musk about investing in South Africa could help move the dial in the broader discussion about the future of B-BBEE
Musk will find a burgeoning city between Midrand and Pretoria — Centurion — that did not exist in its current size and nature when he was growing up. Or he might remember it as Verwoerdburg. Centurion has the communications regulator, the Independent Communications Authority of South Africa (Icasa), among its corporate inhabitants. Icasa is a typical South African state company, and it loves its reputation as one of the most useless state entities. Regarding Musk, Icasa will matter because it is the custodian of the rules regarding control and equity limitations for the ICT sector.
It sets the rules for providers of communication networks and services, satellite providers and others, applying different rules to individual and class licensees.
It works with the department of trade, industry & competition, which sets B-BBEE requirements via the ICT sector code published by the minister.
For Icasa, it is not enough that companies tick the B-BBEE requirements. It requires them to continually comply with strict empowerment requirements, with the obvious threat of losing a licence if they transgress. Generally, the requirements are 30% black ownership and level 4 B-BBEE status, which has its own specific assessment under the ICT sector code.
The conversation between President Cyril Ramaphosa and Musk about investing in South Africa could help move the dial in the broader discussion about the future of B-BBEE. The discussion has focused on two areas: the failure of B-BBEE and the need for an equal society.
Some thinkers have hailed Malaysia’s Bumiputera empowerment model as one that South Africa should emulate. Bumiputera, for example, has quotas in the higher education system to encourage access to institutions and the production of graduates from previously disadvantaged groups. This has its critics, who feel positions are reserved for the previously disadvantaged at the expense of the rest of society. On the other hand, good quality education is a powerful way to restructure an unequal society. Due to its broad nature, Bumiputera is more than just the box-ticking exercise B-BBEE has become, at least at the ownership level.
It is futile to discuss new ideas about B-BBEE in an economy that is not growing, as there are few big transactions. The South African economy and policy instruments can be better, more constructively imagined when there is growth. The question has been posed as to whether B-BBEE is a hindrance to growth and investment.
The Musk case is a good litmus test.
The rearrangement of our politics on May 29 and the creation of a zonke-bonke (one-size-fits-all) GNU provides a new lens for the government to approach an elephant that has taken up too much of the room for too long.
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