New regulations that force South African telecommunications companies to have black ownership will be catastrophic for ISPs and their customers.
This is according to the Democratic Alliance’s Zakhele Mbhele, who was commenting on recently published regulations from ICASA which dictate that all telecoms licensees must have a minimum of 30% of its ownership equity held by black people.
These regulations also demand that individual licensees have a minimum of 30% of its ownership equity held by historically disadvantaged groups, which can include black people, women, people with disabilities, and youth.
Large individual licensees were given 36 months to comply with the regulations, while class licensees and small to medium businesses will need to meet the requirement in 48 months.
Licencees which fail to do so will face substantial penalties of R5 million or 10% of their annual turnover if they do not comply.
Mbhele said that ISPs could turn to fronting in an effort to abide by the “irrational and discriminatory” regulations.
“At the end of the day, South African consumers will bear the ultimate brunt of stunted innovation and increased prices,” Mbhele said.
He added that a recent MyBroadband report, which stated the new rules would effectively stop SpaceX’s Starlink service from entering the country, showed that ICASA was also jeopardising foreign investment with the new rules.
ICASA said that any new applicants for an Electronic Communications Service (ECS) or Electronic Communications Network Service (ECNS) would not be considered if they did not meet the requirements.
A prominent telecommunications industry expert previously told MyBroadband that the regulations would be disastrous and lead to inflated broadband prices.
Many ISP executives have raised concerns about the requirements, maintaining they were an unnecessary overreach that would harm the industry.
The majority of South African ISPs are small, nimble, independent businesses, which are in fierce competition for customers.
This makes them one of the main drivers of lower Internet prices and increased broadband adoption in the country.
Forcing them to sign on new equity partners could radically change the way the industry operates.
The regulations would effectively benefit larger operators with greater means to meet the requirements.
Mbhele said these regulations appeared to be an effort from ICASA to build on government’s controversial Employment Equity Amendment Bill.
This new piece of proposed legislation will give sweeping powers to the Minister of Employment and Labour to identify national economic sectors and to set quotas for these sectors.
The bill has been slammed by business organisations and civil rights groups, including Business Unity SA, the SA Forum of Civil Engineers, and Solidarity.
The Cape Chamber of Commerce and Industry labelled it as “racial and ideological insanity” and effectively “Apartheid in reverse”.
Mbhele said the DA unequivocally opposed the bill and any other legislations that provided for race-based classifications.
“True economic empowerment will only come through innovation and job creation, something BBBEE provides for on paper, but in practice kills for all but the politically connected few,” Mbhele said.