New black ownership rules for South African ISPs and telecoms companies here soon
ICASA said the final regulations related to equity ownership by black people and minimum BEE levels for licensees will be published this year.
The authority said it has a mandate to promote the economic empowerment of black people in general, and women, youth, and the disabled in particular.
This, ICASA said, is done through ownership and control and the development of human resources, training, and capacity building of historically disadvantaged individuals.
The regulator said it noted “an alarming trend of transfer of control and ownership applications that sought to diminish levels of equity ownership by historically disadvantaged groups (HDGs)” in 2014.
In response, it advised that it will no longer approve licence transfer applications which result in less than 30% equity ownership by HDGs in licensees.
This did not have a significant effect. In 2017, approximately 53% of I-ECS and I-ECNS licensees had less than 30% HDG equity ownership.
This resulted in a discussion document in 2017 and a position paper in February 2019 advocating at least 30% equity ownership for all licensees.
A year later, ICASA published draft regulations on equity ownership by historically disadvantaged groups and the application of the ICT sector code in the ICT sector earlier this year.
The draft regulations seek to impose the strict conditions on telecoms licensees like ISPs and telecoms operators, which include:
- A requirement for all existing licensees to comply with the mandatory equity ownership requirements – 30% equity ownership by black people and Level 4 BBEEE status – within 24 months of the promulgation of the regulations.
- Penalties of up to R5 million or 10% of the licensees’ annual turnover where a licensee fails to maintain the mandatory minimum requirement.
- A requirement for annual compliance reporting on the state of equity ownership by black people in the licensee.
The draft regulations require all licensees to be 30% owned by black people if they want to renew, amend, or transfer their licences.
ICASA confirmed that “the 30% equity requirement applies to all sorts of applications for individual licences, including new applications, transfers, renewals, and amendments”.
In simple terms, this means that all ISPs and telecoms companies operating in South Africa will have to be 30% black-owned.
“The final regulations are scheduled to be published in the 2020/21 financial year,” ICASA said in a briefing of Parliament’s Portfolio Committee on Communications.
What ISPs say about the planned equity ownership regulations
While it is not clear whether there will be significant changes to the final regulations, these new rules sent shock waves through the ISP industry.
Service providers who spoke to MyBroadband said 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.
Another ISP owner said while they support transformation in the ICT sector, 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.
Another prominent ISP owner said 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.
ICASA briefing of Parliament’s Portfolio Committee on Communications
The PDF below provides a summary of the State of Transformation in the ICT sector from ICASA’s Parliamentary briefing.
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