Communications and Digital Technologies Minister Solly Malatsi faced fierce push back from lawmakers on Tuesday to his proposed policy direction opening the way for multinational broadband service providers to secure the empowerment credit required for licensing by way of equity-equivalent investment programmes (EEIPs) rather than through the sale of 30% equity to black investors.

On May 23, Malatsi published for a 30-day comment period a proposed policy direction seeking to “harmonise” the requirements and provisions of the Electronic Communication Act (ECA), which stipulates that licensed telecoms firms have 30% black ownership, with other legislation that allows multinationals to use EEIPs as an alternative to the sale of shares.

The Gazette notice makes specific reference to ownership of members of the information and communication technology (ICT) sector, where EEIPs have been used by companies such as Microsoft, IBM and Amazon, in line with the Amended Broad-Based Black Economic Empowerment (BBBEE) ICT Sector Code.

Interest in the changes has been heightened by the fact that Elon Musk’s Starlink, which is operated by SpaceX, has strongly opposed the 30% equity requirement, as well as suggestions that South Africa may have offered to compromise on the requirement as it sought to “reset” its fraying relations with the US and President Donald Trump, who has close ties with Musk.

While the issue was not raised during the televised Oval Office meeting between President Cyril Ramaphosa and Trump, who ambushed the South African delegation with a multimedia presentation purportedly supportive of his discredited claims of a “white genocide” in South Africa, Musk was in the room and reportedly met with the South African delegation ahead of the meeting.

Malatsi insisted that there was no direct correlation between the release of the draft directive for comment and the meeting at the White House, stressing that the process to consider the integration of EEIP in the sector had been initiated in October.

He also argued that the proposed change was not designed to benefit a single individual or company, such as Starlink, but to ensure alignment between various pieces of legislation, including the ECA and BBBEE Act.

Malatsi also dismissed suggestions that he was seeking to undermine black empowerment, saying: “I’m pretty clear that transformation is sacrosanct in this country; that it’s non-negotiable.”

The use of EEIP, he added, did not represent a deviation from broad-based black empowerment, but offered multinationals an alternative way to meet their empowerment commitments.

The decision to proceed on the basis of a direction rather than an amendment to the ECA itself was defended as the most “effective” and “timeous” way to seek alignment between the legislation.

The Minister did not rule out an amendment of the ECA, however, indicating that he would be guided by the comments received on the draft policy direction.

He also confirmed that the Independent Communications Authority of South Africa (Icasa) had expressed a preference for an amendment to the Act over a policy direction.

Lawmakers who are not members of the Democratic Alliance, to which Malatsi belongs, were highly critical of the directive, the timing of its publication and the way it was released.

Several questioned whether the Minister was seeking to subvert both the ECA and the Icasa, while others suggested that the change would not only undermine transformation but also established and emerging participants in the sector.

Questions were also asked about the correlation between the draft policy directive on EEIPs and another draft policy direction published in a May 21 Gazette relating to the possible reopening of applications for Individual Electronic Communications Services Licences.

The potential reopening of licensing by Icasa to new participants could be correlated indirectly to the EEIP direction, the Department of Communications and Digital Technologies acknowledged.

However, it insisted that the process of assessing a reopening was being undertaken separately and had arisen as a result of a Competition Commission report of 2019 and was not in any way linked to the potential Starlink licence application.

There are currently 490 such licences and new market entrants typically negotiate with a holder of a licence to have the licence transferred.