South Africa Considers Equity Investment Programmes to Attract Global Telecom Players

President Cyril Ramaphosa has endorsed a proposal to reform South Africa’s telecommunications sector, backing Communications Minister Solly Malatsi’s push for Equity Equivalent Investment Programmes (EEIPs) as an alternative to the country’s stringent Black Economic Empowerment (BEE) ownership requirements. This move is aimed at enabling global players like Elon Musk’s Starlink to operate in South Africa, sparking both optimism and fierce political debate.

The current regulations require network infrastructure operators and communications service providers to allocate 30% ownership to historically disadvantaged groups (HDGs) to secure national operating licences. This policy is rooted in the Broad-Based Black Economic Empowerment (B-BBEE) Act of 2003, which aims to address apartheid-era inequalities. Malatsi’s draft policy directive, gazetted on May 23, 2025, proposes EEIPs as a workaround, allowing multinationals to meet empowerment obligations through investments in infrastructure, skills development, or digital inclusion initiatives rather than direct equity sales.

Ramaphosa, speaking at the National Council of Provinces, described the proposal as “innovative” and legally sound, emphasizing that it aligns with existing laws and is not tailored to favour any single company, including Starlink. He noted that public hearings will precede any changes. The proposal follows a high-profile meeting between Ramaphosa and U.S. President Donald Trump on May 21, 2025, where South Africa’s BEE policies and Starlink’s potential entry were reportedly discussed, though Ramaphosa later clarified that Starlink was not the focus. The timing has fuelled speculation of external pressure, particularly given Musk’s vocal criticism of BEE laws as “openly racist” and his claim that Starlink was barred from operating because he is not Black.

Musk’s rhetoric, amplified on his platform X, has drawn sharp rebukes from South African officials and opposition parties, with the Economic Freedom Fighters (EFF) accusing the government of capitulating to “white capital” and vowing to oppose Starlink’s entry “in Parliament, in the courts, and the streets.” Starlink has proposed an R500-million ($27.9 million) investment to provide free high-speed internet to over 5,000 rural South African schools, a move that could benefit 2.4 million students and align with EEIP goals. This initiative addresses South Africa’s digital divide, where 20-40% of the population, particularly in rural areas, lacks internet access.

However, regulatory hurdles remain formidable. The Independent Communications Authority of South Africa (Icasa) has yet to receive a formal licence application from Starlink, and its regulations currently do not fully reflect the ICT Sector Code’s provisions for EEIPs. A leading ICT regulatory expert and founder of Ellipsis, Dominic Cull, estimates a minimum two-year timeline for Starlink to operate legally, even under the most optimistic scenarios. Malatsi’s policy directive requires stakeholder comments by early July 2025, followed by a six- to nine-month process to finalise the policy. Icasa would then need 12 to 18 months to amend its regulations, including public hearings, with potential litigation posing further delays.

The debate over EEIPs reflects broader tensions within South Africa’s Government of National Unity (GNU). The Democratic Alliance (DA), Malatsi’s party, has long criticised BEE laws as fostering cronyism, while the African National Congress (ANC) and EFF defend them as essential for transformation. ANC MP Khusela Diko, chair of the parliamentary communications committee, has questioned the timing of Malatsi’s proposal, suggesting it prioritises Starlink over local empowerment goals. Meanwhile, traditional telecom operators, represented by groups like the Association of Communications and Technology, insist that all players, including Starlink, must face the same regulatory scrutiny.

Proponents of the reforms argue that EEIPs could unlock significant foreign investment and bridge the digital divide, citing precedents in sectors like automotive and technology, where companies like Ford and Microsoft have used EEIPs to fund local development. Starlink’s low-Earth orbit satellite technology could revolutionise connectivity in underserved areas, aligning with South Africa’s goal of universal internet access by 2030. Critics, however, fear that loosening BEE requirements risks diluting empowerment objectives, potentially benefiting foreign firms at the expense of local stakeholders.