South African ISPs must have black owners – Draft Regulations

The Independent Communications Authority of South Africa’s (ICASA’s) new draft regulations on ownership in the ICT sector are sending shock-waves through the ISP and telecoms industry.

ICASA published its “Limitations of Control and Equity Ownership by Historically Disadvantaged Groups and the Application of the ICT Sector Code Draft Regulations” on 14 February 2020 for comment.

The draft regulations propose to set new BBBEE ownership requirements over and above the targets that apply under the ICT Sector Code. These include:

  • Licence applicants and licensees applying for approval to transfer, amend or renew an individual licence must be 30% owned by persons from historically disadvantaged groups (HDPs), which category includes but is not limited to Black people.
  • Licence applicants must then also maintain 30% ownership by Black people and achieve level 4 BBBEE status.

Livia Dyer, partner in Bowmans’ Technology, Media and Telecommunications sector group, said it appears that these requirements may apply to applicants for individual licences as well as registrants for class licences.

Licensees will have 2 years to achieve the requisite 30% Black ownership level and have to achieve 50% compliance in 12 months from when the regulations come into effect.

This means that licensees will not be able to wait until their licences are up for renewal before complying.

30% HDG/Black ownership

The Internet Service Providers’ Association in South Africa (ISPA) said the regulations require all current individual licensees, including ISPs, to have a 30% black ownership.

ICASA also confirmed that “the 30% HDGs equity requirement applies to all sorts of applications for individual licences, including new applications, transfers, renewals, and amendments”.

Dyer said the only individual licensees that will not have to comply are licensees that are wholly owned by the government, like Sentech.

She said a licensee that does not comply can have a finding made against it by ICASA’s Complaints and Compliance Committee.

This would presumably include an order to comply with the BBBEE ownership requirement, and a possible fine of R5 million or 10% of annual turnover, whichever is greater.

“ICASA can refuse to renew the licence of a licence-holder that does not comply with an order of the CCC,” Dyer said.

Big impact on ISPs

Many prominent ISPs spoke to MyBroadband about the draft regulations on the condition of anonymity, and they were scathing in their responses.

All of the ISPs agreed that the regulations will have a profound impact on their businesses and will hurt them, their employees, and the economy.

One ISP said it is very challenging to run an ISP in the current tough economy of South Africa, and these regulations will make it even tougher.

“Bureaucratic things like these are very frustrating as it takes a business owner’s focus off what is the most important: helping South Africa’s economy to grow, providing jobs, and delivering great service to clients,” it said.

Another ISP owner said while they support transformation in the ICT sector, they feel that these requirements will have an impact on the red tape required to be able to continue to be licensed.

He added that there will be a cost impact when it comes to preferential procurement requirements.

“In the high-tech sector a lot of equipment and services are procured directly from international vendors and partners, many of whom will never entertain BBBEE requirements,” he said.

One ISP executive was less diplomatic, saying BEE only benefits a few and continues to hinder investment and stunts growth in advancing our economy.

“We cannot hope to alleviate poverty and unemployment in our country with archaic policies that stunt growth,” he said.

“When the telecoms sector was liberalized in 2007, the sector boomed. ISPs and operators employed thousands of people and created Internet access where there was none previously.”

“BEE will have the effect of rolling back these benefits,” he said.

Draft Regulations on ownership in the ICT sector

Icasa BEE by BusinessTech on Scribd

Now read: New BEE regulations for ICT sector

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South African ISPs must have black owners – Draft Regulations