Nobody can tell communications & digital technologies minister Solly Malatsi why equity equivalent investment instead of giving away 30% ownership is acceptable for multinationals in South Africa such as Microsoft and IBM, but anti-transformational in the case of Elon Musk’s satellite internet company Starlink.
“In 2021 Icasa [the Independent Communications Authority of South Africa] introduced regulations limiting the issuance of telecoms licences to companies that have 30% local ownership. At the same time you have the provisions of the BBBEE Act which recognise equity equivalent investment programmes as a legal and legitimate instrument of empowerment,” says Malatsi.
He has been vilified as anti-empowerment for wanting this recognised in the case of Starlink to enable it to come to South Africa.
Though the BBBEE Act overrides Icasa’s sector-specific regulations, the regulator won’t grant Starlink an operating licence unless it complies with the 30% ownership rule, which it won’t do.
In December last year Malatsi issued a formal policy direction instructing Icasa to “urgently consider” aligning its regulations with national legislation.
It said that according to its interpretation of the Electronic Communications Act, that could happen only through a legislative amendment, “which is a very prescriptive reading of that act”, says Malatsi.
Instead of challenging its interpretation in court he has begun a legislative process to bring it in line with the BBBEE Act. It’s a process he concedes is so unpredictable and tied up in red tape that this could take 18 months or longer.
“There are all these barriers and stages of compliance ultimately subject to parliament,” he says, which has made its opposition to Starlink stridently clear.
Meanwhile, more than 20-million South Africans who can’t be reached by mobile network operators, only by low-Earth orbit satellite technology such as Starlink’s, have no internet access, which he regards as “untenable”.
“We have to look at every available instrument to find solutions that will empower poor South Africans, most of them black and based in rural areas, with the power of connectivity. Many of us know what the power of connectivity can unleash in terms of enabling people to look for job opportunities, to access government services online, to access opportunities to make their lives better. That is what we should be looking at.”
He finds it “quite ironic that those who purport to be advocates of empowerment stand in the way of interventions that would help connect millions of poor black South Africans to potentially life-transforming opportunities”.
Couldn’t he ask trade, industry & competition minister Parks Tau, who is the ultimate authority on equity equivalent investment programmes and empowerment laws, to overrule Icasa, given that he allows other multinationals to use equity equivalents rather than hand over 30% of their companies?
He says it’s “debatable” that Tau could overrule an independent Chapter 9 institution. “But it’s very clear what the provisions of empowerment in the country are, and the department of trade, industry & competition has that authority.”
Tau recently framed equity equivalence as a “politically driven global backlash against affirmative action and economic redress”.
Does Malatsi think this was aimed at him?
“My answer to that is simply that equity equivalent investment programmes are legally recognised by our empowerment laws.”
Where there are shortcomings, legal instruments need to be used to improve performance monitoring to ensure that commitments made in terms of those programmes are delivered on, he says.
In a letter to Tau last year, Starlink committed to provide fully funded satellite kits, installation and free high-speed internet to 5,000 rural schools benefiting more than 2.4-million learners annually should it secure a South African operating licence via an equity equivalent investment programme.
“The drafters of the legislation anticipated that for a variety of reasons there would be multinationals that would want to invest in our market without forgoing their ownership, and the reality is that we have those multinationals in the country who have invested billions into the economy and continue to do so,” says Malatsi.
“So I don’t think we are sending the right message to investors with the level of uncertainty being expressed by several voices in government around equity equivalent investment programmes.”
He makes the point that full recognition of equity equivalent investment programmes was adopted by the current administration as one of its reform targets.
“It’s there in the medium-term development policy statement of this administration. The president last year wrote one of his weekly newsletters on equity equivalent investment programmes and the value they bring into our economy.”
Would he have expected more support from President Cyril Ramaphosa for his efforts on behalf of Starlink?
“This for me is not about Starlink. Too often proponents and opponents of Starlink make it about Starlink. Legislative reform is never about one player. It’s about fairness, it’s about opening up opportunities for access.”
For me there is no more powerful way of empowering poor people than to give them access to the internet
The fact that the seventh administration adopted full recognition of equity equivalent investment programmes as part of its reform agenda is “the strongest expression of support in terms of the government’s view”, he says.
However, there’s been strong political pushback against equity equivalent programmes, not least from the chair of parliament’s portfolio committee on communications & digital technologies, Khusela Diko, who called Malatsi’s policy directive “an affront to the fight for equity and redress by the black majority”, implying he was against transformation and empowerment.
“It is the worst form of irony to be accused of that because my quest is about the empowerment of poor South Africans who are unconnected,” says Malatsi. “It can’t be right in this day and age that we have millions of South Africans without internet access, whose plight can be extensively helped through the recognition of equity equivalent investment programmes. We’ve got national priorities, and digital connectivity is one of them.”
The emphasis on Starlink, with references to his “Starlink directive”, is also misplaced, he says.
“This is not just about Starlink. There are low-Earth orbit satellites even from Asia that have expressed a desire to enter the South African market and would be instantly in a position to invest here through the equity equivalent investment avenue.”
They’re not going to invest here if it means relinquishing 30% of their business, he says.
“We have a choice, and this goes to everyone from regulators to opponents of the move to get South Africans connected, between insisting on narrow regulatory compliance or looking at solutions within our law which are there, that will look beyond self-enrichment to empower South Africans.
“It is important to look beyond prescriptive regulatory naivety and beyond ideological leanings, and look at what our law allows.”
Why should it be right that in other aspects of the economy equity equivalent investments are recognised, he asks.
“For me there is no more powerful way of empowering poor people than to give them access to the internet.”
Would he have expected the DA to leverage its position in the GNU more effectively in support of his efforts to bridge the digital divide, which he stresses is part of a national agenda agreed to by the GNU?
The DA has been fully behind him in reinforcing that what he is trying to do is part of the reforms everyone in the GNU agreed to when they adopted the development policy statement of the current administration, he says.
“This is not just a policy Malatsi initiated, it’s a policy initiated and adopted by this administration.”
Isn’t this another example of where the DA has failed to hold the ANC to policies agreed to in the GNU?
“There has been criticism about that, but the DA has shown its mettle in advocating for policies that can achieve the inclusive growth that we need in our country, and also being able to, from a policy perspective, distinguish the DA from the ANC. The key aspect is recognising also that in a coalition where there has to be a level of compromise, we have to get bang for our buck for being in the GNU.”
He feels “very frustrated” about being attacked as an enemy of transformation by the ANC for trying to do what is within the law and part of the policy reform agenda agreed to by the GNU, including the ANC.
“Opponents have tried to reduce it to an individual mission of mine when it is actually in line with the country’s constitution and legislation on empowerment, as well as with this administration’s policy agenda.”
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