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South Africa's B-BBEE ownership requirements: How government barricades the door to foreign investments opportunities.

Aug 23, 2023

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SOUTH AFRICA’s B-BBEE OWNERSHIP REQUIREMENTS
HOW GOVERNMENT BARRICADES THE DOOR TO FOREIGN INVESTMENT OPPORTUNITIES

by Rona Bekker

The South African Government, through its legislative mechanisms and red-tape regulations, is actively barricading the door to foreign investment opportunities, increased tax revenues and job creation.

Through B-BBEE ownership and control measures contained in the licensing requirements for all internet providers in South Africa, they have succeeded, once again, in driving away one of, if not the biggest international satellite internet providers, Starlink.

The Electronic Communications Act requires electronic communications networks which operate for commercial purposes at a provincial or national scale to obtain operating licences from the Independent Communications Authority of South Africa (ICASA).

ICASA indicated it would issue Starlink the relevant and required licences, should it apply and meet requirements. However, one of the requirements is that applicants must “have a minimum 30% equity ownership held by persons from historically disadvantaged groups, which includes black people, women, youth and people with disabilities”.

If Starlink were licensed in South Africa, the service would roll out on a far larger scale with greater speed than is the case at present. Starlink would make a tax contribution, create jobs, and give access to broadband for those in remote rural areas, which would expand educational and job opportunities. There would also be greater competition between internet providers, which could lead to lower prices for broadband.

Unlike South Africa, other African countries have been rapidly issuing licences for the service, including Nigeria, Rwanda, and Mozambique. Most of the African continent will have issued licences by the end of 2024, which will further contribute to South Africa not being an attractive investment destination.

Just last month, Starlink was granted a licence in Kenya. Kenya had an ownership law that was similar to that of South Africa’s empowerment requirement, but it was recently scrapped. The end to this requirement, that 30 percent of any information technology investment by foreigners had to be held by Kenyan citizens, was motivated by the country’s drive to become “an attractive investment digital hub” and to advance the knowledge economy. In Kenya’s case the scrapping of the ownership requirement led to further investments by Starlink, Amazon and Airtel.

There is a plethora of companies that were shown the door or who elected to shun South Africa specifically due to these ridiculous requirements. What is abundantly clear from the Starlink-example, is not our country’s aversion towards progress and or technological advances, but our Government’s destructive insistence on horrific and economically damaging, anti-business policies, which will ensure that our stagnant economy never gets up from its knees.

What has been experienced in South Africa, through the enforcement and implementation of these measures, is the perpetuation of disadvantage, the widening of the gap between the few who gain and the many who suffer. These requirements are the vehicle through which corruption, intra- and ultra-African inequality is fostered, enriching a select few B-BBEE culprits, via share deals, and the looting of public funds in the name of broad-based black empowerment.

Demanding a stake of 30% in the South African operations of global investors is ludicrous. When weighing up the benefit of expanding into South Africa against the detriment suffered by the company through the sacrifice of 30% ownership, it is obvious that for a global investor investing in South Africa is not feasible. The fact is, within these circumstances, the financial damage suffered by these investors by not expanding into South Africa is negligible. The only victims of Government’s regulatory crime are the South African economy and the South African public.

Rona Bekker is the Policy Manager at the National Employers’ Association of South Africa (NEASA).

For more information:
NEASA Media Department
media@neasa.co.za

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