The Department of Communications and Digital Technologies (DCDT) on Friday gazetted a draft policy direction on the role of equity equivalent investment programmes (EEIPs) in the information and communications technology (ICT) sector.

Stakeholders have 30 days to submit comments on the draft policy direction which aims to provide policy certainty to attract investment into the ICT sector, with focus on licensing for broadcasters, Internet service providers, mobile networks or fixed and mobile networks.

Currently, the rules around who can acquire a licence to provide electronic communications services or to operate an electronic communications network, require a minimum of 30% shares to be in the hands of historically disadvantaged individuals or groups.

“These regulations do not currently allow companies that can contribute to South Africa’s transformation goals in ways other than traditional ownership, to qualify for individual licences under the Electronic Communications Act (ECA), whether or not they are big international companies that do not usually sell shares to local partners,” said Communications and Digital Technologies Solly Malatsi in a statement on Friday.

EEIPs are provided for under the Broad-Based Black Economic Empowerment (BBBEE) Act, No 53 of 2003 and the ICT Sector Code, and allow qualifying multinationals to meet empowerment obligations through alternatives to 30% ownership.

This includes investment in local suppliers, enterprise and skills development, job creation, infrastructure support, research and innovation, digital inclusion initiatives and funding for small, medium-sized and microenterprises.

The Independent Communications Authority of South Africa’s (Icasa’s) Ownership Regulations, however, do not fully reflect its provisions, particularly regarding deemed ownership and EEIPs.

“Therefore, this policy direction aims to ensure consistency, unlock investment, and give practical effect to the ICT Sector Code in line with national development goals, including transformation.”

Once finalised, the draft policy direction will enable Malatsi to direct Icasa to align its Ownership Regulations applicable to licensing under Section 5 of the ECA with the full scope of the ICT Sector Code, including recognition of EEIPs and deemed ownership mechanisms.

This further includes directing the communications authority to apply BBBEE criteria to the ICT sector that align with national priorities, transformation objectives, and investment attraction; and engage with the DCDT, the Department of Trade, Industry and Competition and the ICT Sector Council to define acceptable EEIP contributions in the ICT context.

“Crucially, the direction makes it clear that new market entrants, including those offering new or disruptive technologies, will not be exempt from transformation obligations.

“Even if companies are not rolling out large-scale infrastructure, they will be required to make commitments that are substantive and clearly aligned with South Africa’s socioeconomic development goals,” Malatsi said, noting that different technologies may have different rollout models, but transformation was non-negotiable.

“All players must contribute meaningfully to equity, skills development and economic inclusion.”

Icasa’s regulations may continue to require 30% equity ownership by historically disadvantaged individuals but must also permit commitments envisaged by the ICT Sector Code as valid conditions for applications for individual licences.

These developments emerge as Starlink’s Elon Musk criticised the ECA’s 30% ownership requirements for a licence to operate, implying that this prevented the satellite operator from launching in South Africa.

Starlink’s official South African launch has been on hold since December 2022.

In August 2024, Icasa published a proposed new Licensing Framework for Satellite Services for public comment, to which Starlink owner, SpaceX, responded, in a written submission, that the regulator should reconsider the requirement for 30% shareholding by historically disadvantaged groups, noting that the requirement would have the effect of excluding international investment.

Starlink’s parent company further stated that, by aligning the licensing and ownership regulations with the ICT Sector Code, which recognises EEIPs as an alternative to local shareholding, Icasa could remove a significant barrier to foreign satellite operators.