Elon Musk’s BEE roadblock

Elon Musk-owned SpaceX, which operates Starlink, has warned the Independent Communications Authority of South Africa (Icasa) that overly-restrictive BBBEE regulations for the telecommunications sector could be costing the country.

It also suggested a relatively simple fix that would allow Icasa to meet its broad-based black economic empowerment obligations under the Electronic Communications Act, while encouraging investment from foreign network operators.

In a November 2024 submission regarding a proposed new licensing framework for satellite services, the Starlink operator said many foreign satellite operators have global policies that prevent local shareholding.

SpaceX said that, in particular, operators with direct-to-consumer business models have policies like this that exclude them from the South African market.

“This holds true even when these operators are willing to comply with BBBEE requirements and invest in initiatives that directly benefit the target communities,” SpaceX stated.

SpaceX said Icasa could remove this significant barrier to foreign satellite operators by aligning its licensing and ownership regulations with the ICT Sector Code.

This is the Code of Good Practice for the ICT sector already published by the Department of Trade, Industry and Competition (DTIC) under the Broad-Based Black Economic Empowerment Act.

SpaceX explained that the ICT Sector Code recognises equity equivalent programmes as an alternative to local shareholding.

“This would not only increase foreign investment in South Africa but would also create broader industry benefits, supporting innovation, competition, and long-term growth,” SpaceX stated.

Under existing Icasa regulations, all telecommunications network operators and service providers that offer national services must be 30% owned by historically disadvantaged individuals.

An Individual Electronic Communications Network Service (I-ECNS) is needed to build and operate physical network infrastructure.

Internet service providers with a national footprint require an Individual Electronic Communications Service (I-ECS) licence to sell end-user products to consumers and businesses.

Direct-to-consumer services like Starlink require both licences. They also need radio frequency spectrum licences, which they can only acquire once they have an I-ECNS licence.

One alternative is for Starlink to partner with a local company that already has the necessary licences. However, then it would no longer be direct-to-consumer.

Further complicating the issue is that Icasa has not issued new I-ECS or I-ECNS licences in 14 years.

Operators can’t simply apply for these licences — Icasa must first issue an invitation to apply.

While the regulator has the discretion to issue invitations for I-ECS licence applications, only the Minister of Communications can direct Icasa to open applications for I-ECNS licences.

As a result, the only way to obtain such licences is to acquire them from an existing licensee — a transaction that routinely costs over R1 million per licence.

The Internet Service Providers’ Association of South Africa (ISPA) has suggested that this could be fixed if Icasa and the Minister issue standing invitations permanently open to all.

SpaceX’s proposal that Icasa align its regulations with the DTIC’s ICT Sector Code follows communications minister Solly Malatsi’s announcement in October that he would issue a policy direction about equity equivalent programmes.

The policy direction would be issued for Icasa’s urgent consideration, Malatsi stated.

Malatsi’s announcement came after he met with Starlink representatives and President Cyril Ramaphosa met with Elon Musk, the South African-born founder and CEO of SpaceX.

“After consultation with Icasa, the proposed policy direction will be published for comment as per the Electronic Communications Act,” Malatsi stated.

“This is in line with the Codes of Good Practice which recognise that the global nature of their operations may constrain multinationals in their ability to comply with equity ownership requirements,” he said.

“Equity equivalents, recognised in other sectors, provide an avenue for factoring in alternative ways for companies to make an impact on South Africa’s socioeconomic development.”

Malatsi said policy clarity on the recognition of equity equivalence schemes has long been sought by players in the ICT industry.

“This will provide the certainty necessary to attract increased investment in ICT and accelerate universal Internet access.”