Proposed ICT policy directive tests SA’s transformation laws

While much has been said about the need for South Africa’s regulatory frameworks to create an enabling environment and keep up with rapid technology advancements, communications minister Solly Malatsi’s gazetting of a draft policy direction on Friday has drawn mixed reactions.

The ministerial directive potentially clears the way for tech billionaire Elon Musk’s Starlink to operate locally.

Malatsi was requested to explain the reasons behind his department’s gazetted proposal, appearing today before the Parliamentary Portfolio Committee on Communications and Digital Technologies.

The document notes the directive is aimed at creating an enabling environment for low-Earth orbit satellite firms, among others, to invest in the country, and thus drive broadband rollout.

Since its publication, it has been widely debated across the board, by political parties, ICT pundits, industry bodies and several ministers within the Government of National Unity.

They are questioning what it means for the ICT sector, whether it flies against compliance with SA’s transformation laws and the message it sends to incumbent players about fair play.

The minister’s directive requests the Independent Communication Authority of South Africa (ICASA) to look at the role of equity equivalent investment programmes (EEIPs) in the ICT sector as a mechanism to accelerate broadband access.

Regulations do not currently allow companies that can contribute to SA’s transformation goals in ways other than traditional ownership, to qualify for individual licences under the Electronic Communications Act (ECA). Licence approval requires that a company must be 30% owned by historically disadvantaged groups.

Facilitated by the Department of Trade, Industry and Competition (DTIC), EEIPs were created for multinationals whose global practices or policies prevent them from complying with the ownership element of broad-based black economic empowerment (B-BBEE) through the traditional sale of equity or shares to black South Africans.

Such multinationals must provide proof that they have not entered into any ownership partnership arrangements in other countries globally. EEIPs aim to promote investment in the development of SMMEs and broad-based participation in the economy. For example, Microsoft, Amazon Web Services (AWS), Samsung and several companies in the automotive industry have made EEIP commitments.

Ahead of the minister’s briefing, industry organisations raised concerns about favouritism for some players.

Luvo Grey, president ofthe National Youth ICT Council and deputy chairperson of the South African Internet Governance Forum, says the council has noted the directive with “serious concern and a deep sense of responsibility”.

“While we welcome any effort to clarify the regulatory landscape and stimulate investment, we must state unequivocally that transformation is not negotiable,” says Grey.

“The ECA is explicit in requiring a minimum of 30% ownership by historically-disadvantaged individuals for individual licence-holders. No policy direction can override an Act of Parliament.

“This policy must not become a backdoor to exempt multinational corporations from transformation obligations under the guise of EEIPs. The youth of this country, especially black youth who remain locked out of the digital economy, will not stand by while SA is sold off piece-by-piece to global tech giants who do not invest in local ownership. EEIPs must never become a shield for Elon Musk, or anyother foreign billionaire to bypass local empowerment.”

South African Communications Forum (SACF) MD Katharina Pillay highlights that the ICT sector is regulated and any attempt at policy change must follow due process.

Until then, all licensing must be in accordance with current legislative and regulatory prescripts and established precedent, she states.

“There are two transformation legislative frameworks that apply to the ICT sector. The ECA places a local ownership requirement on all licensees and uses the broader measure of the inclusion of historically-disadvantaged people or groups (HDGs), which is broader than B-BBEE.

“ICASA would then also consider the level of B-BBEE more broadly. This is in addition to the 30% HDG ownership requirement. This is not limited to SA; many countries have local ownership requirements.

“Equity equivalents apply to non-regulated firms. Equity equivalents promote skills development and procurement in lieu of ownership. Each of these elements, including ownership, contributes to specific aspects of transformation.

“An enabling environment to attract and sustain investment is important. Equally important is valuing historic investment. Investors need certainty, clarity and predictability. This means the regulations and regulatory process must be clear and it cannot change on a whim.”

Grey believes a move of this kind sends a “deeply problematic” message to other ICT sector players − that with enough lobbying and international clout, one can bend South African law to suit their business model.

“This undermines the very spirit of inclusive economic growth and transformation. It tells emerging youth-owned ISPs [internet service providers] who’ve played by the rules, who have invested sweat and sacrifice into meeting compliance, that they might be displaced by companies who merely commit to ‘support’ projects rather than share ownership.

“The sector cannot thrive if rules are applied unevenly. The message must be clear: whether you are a township-based WISP [wireless ISP] or a global satellite operator, the rules of the ECA apply equally to all.”

According to Pillay, the draft policy direction purports to encourage investment, as the local ownership requirement in some quarters is considered to be an impediment. “Consider the consistent annual investment of current licensees. The document published is the first step towards testing the waters to changing the licensing framework. This is perceived as a measure to unlock investment.

“Licensing frameworks must be fair and applied in precisely the same manner for all licensees. Equity equivalents, according to the B-BBEE framework, apply only to multinationals who can demonstrate that they have never devested equity in another market. Therefore, this cannot apply to any current licensee who already has a licence. This automatically would create two different dispensations. Does it create a fair set of rules that applies to all equally?

“Current licensees hold the required levels of HDG ownership. We need to recognise the annual ongoing investments in this sector, for at least three decades, which amounts to billions.

“Today, there are several hundred licensees in the market, many of which are for sale. This is not the ideal way to enter the market, as it creates a secondary market and increases the cost of market entry, yet still allows market entry. Partnerships are possible with current licensees. There are various satellite providers entering the market.”

The Association of Comms and Technology (ACT) says it has made submissions to ICASA on the proposal for a satellite licensing framework.

It notes the sector has been under immense pressure to modernise its regulatory frameworks in ways that are more flexible, yet still aligned with national transformation objectives. As a result, its response will be guided by a full appreciation of the broader context: the geopolitical landscape, rapid technological advancements, a complex and layered regulatory environment, pressing socio-economic realities, the evolving competitive terrain and SA’s broader development goals.

“We are carefully considering all these factors to shape a position that protects the best interests of both the telecommunications industry and the broader ICT ecosystem. At this stage, we are not in a position to comment further – we will reserve our final view for our official submission.

“What we can say is that ACT’s consistent stance remains that a level playing field is non-negotiable, and regulatory parity must not benefit selected players, but apply fairly across the entire ecosystem. This requires the strict application of the rule of law.”

According to Grey, the best approach for players like Starlink to operate in the local market is simple: comply with South African law.

“Starlink cannot be compared to companies like Microsoft or AWS, which operate as software and platform providers, and have approached EEIPs through the DTIC under different contexts. Starlink is a network operator. It owns and controls infrastructure and, therefore, must be held to the same standards as any telco or ISP operating in our country.

“South Africa cannot afford to set a precedent that transformation is optional. If we let one global player operate above the law, we will have no moral or legal ground to stand on when local operators ask for the same exemptions.”

ACT points out that the minister’s policy directive is not aimed at any specific operator; rather, it outlines a broader framework for the satellite communications environment in SA.

“It is worth noting that several satellite providers are already operating locally through various partnership models. These include entering into agreements with entities that hold the necessary licences, in compliance with the current regulatory framework.

“Our members, for example, have established collaborative arrangements with satellite companies, demonstrating there are viable avenues for market participation without requiring a fundamental change to existing licensing structures.”

According to the industry body, its position is clear that “all entrants must follow the same rules and processes as existing licensees. The regulatory landscape must evolve to address this emerging scenario, and we are keenly observing how ICASA and the department intend to ‘solve for X’, while balancing innovation with fairness, sustainability and transformation.”

Meanwhile, a petition, titled: “Defend SA’s sovereignty and rule of law: Reject backdoor entry of Starlink through capture” has been published on Change.org.