Johannesburg, South Africa – A heated debate is brewing in South Africa over proposed changes to the country’s telecommunications regulations, with a senior Member of Parliament (MP) accusing Communications Minister Solly Malatsi of attempting to undermine local ownership laws to accommodate foreign companies, including Elon Musk’s Starlink.

The controversy centers around the Electronic Communications Act,which mandates that historically disadvantaged groups hold at least 30% equity in any entity seeking a telecommunications,broadcasting,or postal services license in South Africa. Last year, Minister Malatsi, a member of the Democratic Alliance, indicated his intention to issue a policy directive that would recognize “equity equivalent programs” as an choice to direct equity ownership, ostensibly to attract multinational corporations that cannot meet the 30% requirement.

This proposal has sparked fierce opposition from some quarters, notably from within the African National Congress (ANC). SpaceX, Starlink’s parent company, previously communicated to the Autonomous communications Authority of South Africa (Icasa), the nation’s communications regulator, that the local shareholding laws presented a notable obstacle to their operations.

It appears these proposed directives and regulations are an attempt to undermine empowerment legislation by stealth and, should this be found to be the case, they will be fiercely opposed.

Khusela Diko, Chair of the Portfolio Committee on Communications & Digital Technologies

Khusela Diko, the ANC chair of the Portfolio committee on Communications & Digital Technologies, released a statement asserting that the minister’s actions were an attempt to “erode hard-won conversion goals” achieved through existing legislation. Diko’s concerns resonate with a segment of the South african population that views the equity requirements as essential for redressing historical economic imbalances.This mirrors debates within the U.S. regarding affirmative action and set-aside programs for minority-owned businesses, albeit in a different regulatory context.

Concerns of “Overreliance” on a single Provider

Diko further highlighted the successful partnership between mobile operator MTN and American LEO satellite provider Lynk, which recently trialed Africa’s first satellite voice call using a standard smartphone, as an example of what can be achieved within the existing legal framework.

“These initiatives underscore the importance of fast-tracking South Africa’s satellite program, and that there is no need for overreliance and obsession with a single satellite provider,” Diko said, making a clear reference to Starlink.

diko’s statement suggests a preference for diversifying South Africa’s satellite communications infrastructure and fostering local innovation, rather than relying heavily on a single foreign provider. This mirrors the U.S. government’s efforts to promote competition and prevent monopolies in the telecommunications sector.

she also noted that “Several other satellite providers have indicated keen interest in entering the South African market and in compliance with our laws.” The identities of these other providers, however, were not disclosed.

Equity Equivalency Programs: A Viable Alternative?

The crux of the debate lies in the potential use of “equity equivalent programs.” These programs would allow foreign companies to contribute to the South African economy in ways other than direct equity ownership, such as through skills growth, technology transfer, or investment in local infrastructure. Minister Malatsi and his supporters argue that these programs could attract much-needed foreign investment and accelerate broadband access in underserved areas, perhaps benefiting millions of South Africans.

Similar “in-lieu” contribution models are sometimes seen in U.S. infrastructure projects, where developers might contribute to community development funds instead of meeting specific local hiring quotas. The effectiveness and fairness of these models are often hotly debated.

However, critics like Diko fear that equity equivalent programs could become a loophole, allowing foreign companies to circumvent the spirit of the law and maintain undue control over vital sectors of the South African economy. This concern is echoed by some U.S. labor unions, who argue that companies often prioritize cost savings over genuine community investment when given alternative compliance options.

starlink in South Africa: why equity equivalence makes sense

Potential Implications for U.S.Companies

The outcome of this regulatory battle in South Africa could have significant implications for U.S. companies seeking to operate in the country’s telecommunications sector. If South africa relaxes its local ownership requirements, it could pave the way for increased investment from U.S. firms like Starlink. Conversely, a strict enforcement of the existing laws could deter some U.S. companies,leading them to focus on other markets.

The U.S. government has a long-standing interest in promoting free and fair trade with South Africa.The debate over local ownership requirements highlights the complex balancing act between attracting foreign investment and protecting domestic economic interests, a challenge faced by policymakers in both countries.

The Road Ahead

The South African government is expected to release further details on its proposed policy directive in the coming months.The issue is highly likely to be debated extensively in parliament and could face legal challenges from parties opposed to the changes. The resolution of this issue will not only shape the future of South Africa’s telecommunications industry but also serve as a test case for other African countries grappling with similar questions of foreign investment and local ownership.