Elon Musk’s good news for South Africa

Elon Musk has said that he would love to invest in and otherwise support South Africa.

The SpaceX, Tesla, and Twitter/X CEO was responding to a MyBroadband article reporting that communications minister Solly Malatsi had met with Starlink representatives.

Malatsi also suggested that South Africa re-examine telecoms regulations impeding digital inclusion, for the overall benefit of the sector and the country.

South Africa was previously one of the first countries on Starlink’s list of planned rollouts, with pre-orders for the service launching locally in February 2021.

The SpaceX-operated low Earth orbit (LEO) satellite broadband service initially targeted a 2022 launch for South Africa.

However, in March 2021, the Independent Communications Authority of South Africa (Icasa) issued new regulations that changed ownership equity laws for telecommunications companies in South Africa.

These new regulations stipulated that it was no longer acceptable for national network operators and service providers to be 30% owned by historically disadvantaged groups, which include black people, youth, women, and people with disabilities.

Instead, telecommunications providers with a national footprint had to be 30% black-owned.

Due to the industry backlash during the public consultation period for these regulations, Icasa suspended this provision until an unspecified future date.

Therefore, the old ownership equity requirements remain in effect, but the axe of regulations that could change at the drop of a hat has hung over the industry for three and a half years.

In April 2021, Icasa also told MyBroadband that Starlink would need to comply with the black ownership requirement.

Although Starlink never confirmed that this regulatory change and the uncertainty around it caused it to halt its South African plans, well-placed industry sources have said they were absolutely to blame.

Six months after the regulations were published, around November 2021, Starlink pushed back its planned launch in South Africa to 2023.

Nearly a year later, in September 2022, it was changed to “unknown”, where it has remained until today.

To be clear — the regulations do not mean that Musk has to sell 30% of SpaceX to a BEE partner.

SpaceX would either need a local entity in South Africa that was 30% black-owned, or it would need to partner with a local company that already had the requisite communications network and service licences it needed.

Malatsi explained that the purpose of his meeting was to get a sense of Starlink’s plans for potential investment in South Africa while outlining the current regulatory requirements.

He also provided guidance on what Starlink would need to do to comply.

He alluded to the complexity of South Africa’s regulatory environment, saying it may inadvertently be holding back the country’s broadband expansion.

“President Ramaphosa is constantly imploring us as ministers to review existing regulations with the sole purpose of unlocking opportunities that will also improve the quality of life for all South Africans,” Malatsi said.

“For me, as the Minister of Communications and Digital Communications, that means constantly assessing bottlenecks that, if unlocked, will boost our efforts to connect people to opportunities for livelihoods, business, learning and entertainment in a digitally connected society.”

Malatsi said government needed to be open-minded in exploring every practical regulatory avenue that could open the door for millions of South Africans to access LEO connectivity, like Starlink.

“We need our regulatory environment to encourage companies to invest in South Africa while simultaneously promoting inclusive growth and job creation rather than suffocate it, even if it’s inadvertent,” Malatsi said.

Although Malatsi did not name specific regulations that could be impeding Starlink’s launch in South Africa, several issues present potential hurdles besides the local ownership requirements.

The first issue is that Icasa has not issued new Individual Electronic Communications Network Service (I-ECNS) and Individual Electronic Communications Service (I-ECS) licences in fourteen years.

While the Minister of Communications and Digital Technologies must issue a policy directive before Icasa can open invitations to apply for I-ECNS licences, the Internet Service Providers’ Association previously said this is a relatively simple matter.

Starlink’s only option to obtain these licences would be to find someone selling theirs or acquire a company that already had licences.

This process can take several months and cost millions of rand.

It would also not circumvent the 30% historically disadvantaged person ownership requirements, as Starlink would still need to transfer ownership and control of these licences, where Icasa would assess equity.

Another potential hurdle for Starlink is Icasa’s recent proposal of new regulations specifically for satellite Internet services, which could arguably introduce even more laborious requirements for it to operate in South Africa.

Starlink is not the only investment from Elon Musk being held back by South Africa’s regulatory morass.

Musk said earlier this year that his electric vehicle company, Tesla, had not launched locally because the government kept import duties high to protect the local manufacturing industry.

He said it didn’t make sense for Tesla to launch in South Africa as electric cars are not locally made.

This was a reference to South Africa’s slow response to calls from carmakers to develop and publish a coherent policy for electric vehicle (EV) manufacturing.

Vehicle manufacturers with South African operations pleaded with the government for years to take a stance on EVs.

Volkswagen warned that the country was at risk of being overtaken by countries like Ethiopia and Egypt due to the lack of policy direction.

Although there have been positive developments in this regard, incentives for EV manufacturers will only kick in from 2026.

Finance minister Enoch Godongwana announced during his budget statement in February that carmakers will be able to claim a 150% tax break on investments in local electric vehicle manufacturing.