The ICT SMME Chamber, which represents the interests of small businesses in South Africa, has slammed the proposed changes to the country’s black economic empowerment (BEE) laws.
This, after in May, communications and digital technologies minister Solly Malatsi gazetted a draft policy direction on the role of equity equivalent investment programmes (EEIPs) in the ICT sector as a mechanism to accelerate broadband access.
South Africa’s current Electronic Communications Act (ECA) mandates that foreign telecoms companies must allocate 30% local equity to historically disadvantaged individuals (HDIs) to gain a licence.
This has seen companies like Elon Musk’s Starlink failing to obtain an operating licence in the country, as they have not complied with this requirement.
Malatsi’s draft policy direction proposes allowing EEIPs as an alternative – meeting empowerment targets through investments in local suppliers, jobs, skills, infrastructure and SMME support rather than direct shareholding.
Commenting on the proposal, the ICT SMME Chamber says the organisation supports the objectives of increasing investment and accelerating broadband rollout, especially in underserved areas.
“However, we strongly oppose the attempt to reinterpret or override the legislated 30% HDI equity ownership requirement in favour of Equity Equivalent Investment Programmes, particularly as it relates to licensing under the ECA, which is a separate legal and regulatory framework from the B-BBEE Act,” says Loyiso Tyira, MD of the ICT SMME Chamber.
He notes that EEIPs were developed under the B-BBEE Act to accommodate multinational companies that cannot meet ownership requirements due to global constraints.
“They are not a substitute for legal requirements imposed by the Electronic Communications Act, which clearly stipulates that individual licences must include not less than 30% ownership by historically disadvantaged individuals.
“The attempt to conflate EEIP compliance with the ownership requirements of the ECA is legally flawed and sets a dangerous precedent,” he adds.
‘Tick-box exercises’
The policy direction proposes that the word “or” in Section 9(2)(b) of the ECA allows for equity ownership to be replaced by compliance with other B-BBEE regulations.
“We reject this interpretation as disingenuous and contrary to the spirit and intent of the law, which links licensing rights directly to ownership, not mere compliance scores,” he says.
According to Tyira, the impact of EEIPs on the ICT sector to date remains negligible. He points out that many programmes are designed and run unilaterally by large corporates, with little to no oversight, accountability or measurable developmental impact.
“These initiatives have become tick-box exercises to secure high BEE ratings, often bypassing black-owned SMMEs and communities entirely.
“It is highly revealing that all support for this policy direction comes from large corporates and multinational entities, and not a single legitimate SMME body has endorsed this proposal. The ICT SMME Chamber, representing ICT SMME businesses, was not consulted in the development of this policy and categorically opposes it,” Tyira says.
Among other recommendations, the organisation urges Malatsi to “withdraw the attempt to reinterpret Section 9(2)(b) of the ECA to accommodate EEIPs”.
It also urges the Independent Communications Authority of South Africa to uphold and enforce the legislated 30% HDI ownership requirement for all network and service licence applicants.
The ICT SMME Chamber adds that policy-makers must ensure EEIP frameworks are co-created and co-governed by sector bodies, including SMME representatives and are not led solely by corporate actors.
“There is a misguided narrative that suggests transformation is somehow at odds with investment, economic growth, innovation or job creation. This could not be further from the truth,” says Tyira.
“In the South African context, a well-designed, deliberate transformation programme is not a constraint, it is an enabler. True transformation expands markets, broadens the talent pool, stimulates inclusive innovation and brings new entrants into the economy who can create value, not just consume it.
“Any effort to pursue growth or digital expansion in South Africa without a credible transformation agenda is short-sighted, unjust and ultimately unsustainable. It creates the illusion of progress, while reproducing continued systematic inequality.”
ISPA in support
Meanwhile, as the deadline for public comment on the proposed new policy direction nears, the Internet Service Providers’ Association (ISPA) says it supports finalising the draft in its current form.
“As others, including the president, have noted, the proposed EEIP is not only consistent with current laws, it is an innovative way to take empowerment to another level, while enabling greater investment in the economy, particularly by multinationals,” says Sasha Booth-Beharilal, ISPA chairperson.
ISPA says it hopes the finalised policy will unlock opportunities in wholesale satellite services and improve national access to digital services.
In his weekly newsletter, president Cyril Ramaphosa said empowerment laws are not unique to South Africa.
“South Africa’s empowerment laws are distinct in that our empowerment or indigenisation measures are practical and innovative,” said the president.
“In addition to having a pure equity participation measure, we have introduced the Equity Equivalent Investment Programme. It was created to accommodate multinationals whose global practices or policies prevent them from complying with the B-BBEE ownership element through the ‘traditional’ sale of equity or shares. It allows multinationals to invest in socio-economic, skills and enterprise development in South Africa without selling equity in their local subsidiaries.
“Some in the public space have recently sought to suggest that the EEIP represents a circumvention of B-BBEE laws – and that it is a response to the conditions of a particular company or sector. Neither are factually correct.
“Firstly, the EEIP is not new and has been in existence for a decade. It is firmly embedded in our laws and is not an attempt to ‘water-down’ B-BBEE. Secondly, there are stringent requirements for multinationals to participate.”
According to Ramaphosa, all EEIP initiatives must be aligned to government’s economic policies and strategic goals.
He said since its inception, the EEIP has encompassed a broad range of sectors and onboarded some of the world’s leading multinational firms, such as Hewlett-Packard, Samsung, JP Morgan, Amazon and IBM, and automotive firms such as BMW, Volkswagen, Nissan and Toyota.
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