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ICASA said final regulations related to black equity ownership and minimum BEE levels for licensees will be published this year.
The authority said it has a mandate to promote the economic empowerment of blacks in general, and of women, youth and the disabled in particular.
This, ICASA said, is done through the ownership and control and development of human resources, training and capacity building of historically disadvantaged people.
The regulator said it noticed “an alarming trend of transfer of control and ownership applications that sought to lower the levels of capital ownership of historically disadvantaged groups (HDGs)” in 2014.
In response, it cautioned that it will no longer approve license transfer requests that result in less than 30% HDG equity interest in licensees.
This had no significant effect. In 2017, approximately 53% of I-ECS and I-ECNS licensees held less than 30% of HDG’s equity interest.
This resulted in a discussion paper in 2017 and a position paper in February 2019 that advocated for at least a 30% equity stake for all licensees.
One year later, ICASA published a draft regulation on the ownership of shares by historically disadvantaged groups and the application of the ICT sector code in the ICT sector earlier this year.
The draft regulations seek to impose strict conditions on telecom licensees such as ISPs and telecom operators, including:
- A requirement for all existing licensees to meet the mandatory shareholding requirements (30% shareholding of blacks and BBEEE level 4 status) within 24 months of the regulations being promulgated.
- Penalties of up to R 5 million or 10% of the licensees’ annual turnover when a licensee does not meet the mandatory minimum requirement.
- A requirement for annual compliance reporting on the status of capital ownership by black people in the licensee.
The draft regulations require that all licensees be 30% owned by black people if they want to renew, amend or transfer their licenses.
ICASA confirmed that “the 30% participation requirement applies to all types of individual license applications, including new applications, transfers, renewals and modifications.”
In simple terms, this means that all ISPs and telcos operating in South Africa will have to be 30% black owned.
“Final regulations are scheduled to be published in the 2020/21 financial year,” ICASA said at a briefing by Parliament’s Communications Portfolio Committee.
What ISPs Say About Planned Capital Ownership Regulations
While it’s unclear if there will be significant changes to the final regulations, these new rules sent shockwaves through the ISP industry.
Service providers who spoke to MyBroadband said the regulations will have a profound impact on their businesses, hurting them, their employees and the economy.
One ISP said that it is very difficult to run an ISP in South Africa’s current tough economy, and these regulations will make it even more difficult.
Another ISP owner said that while they support transformation in the ICT industry, these requirements will impact the bureaucracy required to continue to obtain the license.
He added that there will be a cost impact when it comes to preferential procurement requirements.
Another prominent ISP owner said that BEE only benefits a few and continues to hinder investment and hamper growth as our economy advances.
“We cannot hope to alleviate poverty and unemployment in our country with archaic policies that hamper growth,” he said.
ICASA Report of the Parliament’s Communications Portfolio Committee
The PDF below provides a summary of the state of transformation in the ICT sector from the ICASA parliamentary briefing.
Draft regulation on property in the ICT sector
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