South Africa Proposes Equity Equivalent Model to Ease B-BBEE Requirements for ICT Sector
On 23 May 2025, Communications and Digital Technologies Minister Solly Malatsi unveiled a draft policy direction in the Government Gazette proposing an alternative to the stringent Broad-Based Black Economic Empowerment (B-BBEE) ownership requirements for the ICT sector. The new model would allow companies to meet empowerment obligations through “Equity Equivalent Investment Programmes (EEIPs)” rather than direct ownership transfers. This move could facilitate the entry of global players like Starlink into South Africa’s telecommunications market while still advancing economic transformation.
Current B-BBEE Requirements in the ICT Sector
Under Section 9(2)(b) of the Electronic Communications Act (ECA), 2005, individual telecom licensees must allocate at least 30% equity ownership to Historically Disadvantaged Groups (HDGs), ‘or’ such other conditions or higher percentage as may be prescribed by the government. This mandate aligns with South Africa’s broader B-BBEE framework, which seeks to redress apartheid-era economic imbalances.
The Independent Communications Authority of South Africa (ICASA) has further reinforced these requirements through the HDG Equity Ownership Regulations (2021), which apply the ICT Sector Code to ensure compliance. However, the use of the word “or” in the ECA allows for alternative empowerment mechanisms, as prescribed under Section 4(3)(k) of the ICASA Act.
Read the Gazette here.
Proposed Equity Equivalent Investment Programmes (EEIPs)
The draft policy introduces an equity equivalent model, enabling companies to fulfil B-BBEE obligations through alternative investments, such as:
- Funding black-owned small businesses
- Supporting local ICT suppliers
- Investing in skills development and job creation
This approach mirrors exemptions previously granted to multinational corporations like Microsoft, Hewlett-Packard, and Samsung, as well as the automotive industry (2019), where direct ownership transfers were deemed impractical.
Policy Rationale: Balancing Investment and Transformation
The ministry argues that the policy shift will:
- Attract foreign investment by reducing regulatory barriers
- Encourage market participation from global tech firms (e.g., Starlink)
- Maintain empowerment goals through alternative economic contributions
Minister Malatsi stated: “The policy seeks to provide the much-needed policy certainty to attract investment into the ICT sector.”
The move is also seen as part of President Cyril Ramaphosa’s broader strategy to stabilise US trade relations, which have deteriorated under the Trump administration. Recent US actions, such as cutting aid, expelling South Africa’s ambassador, and threatening tariffs, have heightened economic pressures, making investment-friendly reforms more urgent.
Political Backlash and ANC’s Response
The proposal has sparked debate, with critics suggesting it is tailored to benefit Elon Musk’s Starlink, which has faced delays in entering South Africa due to B-BBEE ownership rules. Musk has previously criticised the policy as “openly racist.”
However, the African National Congress (ANC) First Deputy-Secretary Nomvula Mokonyane dismissed these claims, stating: “South Africa cannot create laws specifically for Elon Musk.” She emphasised that the policy aligns with existing exemptions for other multinational corporations.
Implications for South Africa’s Satellite and Tech Industry
South Africa is a leader in Africa’s satellite manufacturing sector, with several firms supplying critical subsystems to global markets, particularly the US. The proposed policy could:
- Safeguard export relationships at risk from US trade tensions
- Boost local innovation by attracting tech investments
- Provide flexibility for global firms while maintaining transformation objectives
Next Steps: Public Consultation and Finalisation
The draft regulation is now open for 30 days of public comment before finalisation. If approved, it could significantly shift South Africa’s approach to B-BBEE compliance in the ICT sector, prioritising economic growth without abandoning empowerment goals.
Furthermore, South Africa’s proposed equity equivalent model represents a pragmatic compromise between attracting foreign investment and advancing economic transformation. While critics question its motivations, the policy follows established precedents and could help stabilise the country’s tech and telecommunications landscape amid growing global economic pressures. The next month will be crucial in shaping its final form and impact on South Africa’s digital future.