On Friday, the South African government released a draft regulation that enables foreign businesses to fulfill the 30% black ownership requirement through investments aimed at promoting economic equality.
This move is largely viewed as an effort to eliminate the significant obstacles that have kept Elon Musk and his Starlink satellite internet service from entering the South African market, largely due to Musk being white.
Musk has frequently expressed that he faces challenges conducting business in South Africa because he does not meet the black ownership criteria. Essentially, his company cannot operate unless it includes 30% ownership by black investors, in accordance with the country’s Black Economic Empowerment (BEE) laws. Typically, these ownership stakes are allotted to supporters of the ruling party.
The Minister of Communications and Digital Technology, a former member of the opposition party known as the Democratic Alliance, noted in a press conference on Friday that South Africa is considering the racial allocation of BEE to implement a “change” via the “Equity Equivalence Investment Program (EEIP)” and the “Racial Quota of BEE,” which aim at redistributing wealth and ownership based on race.
He stated:
Presently, to provide electronic communication services or to secure a license for operating electronic communication networks, a minimum 30% stake must be held by historically disadvantaged individuals.
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The EEIP falls under the broader Black Economic Empowerment Act (Article 53 of 2003) and the ICT [Information and Communication Technologies] Sector Code, allowing qualifying multinational firms to meet their empowerment obligations through various means, such as investing in local suppliers, skill development, job creation, infrastructure support, research and innovation, digital inclusion efforts, and funding for small, medium, and micro enterprises (SMMEs).
While these regulations are still in draft form, Musk’s Starlink was brought up by South African businessman Johan Rupert during a presidential meeting in the Oval Office on Wednesday. Rupert emphasized the necessity for Starlink to provide internet access to underserved communities and criticized his government for its past reluctance to engage with American technology.
It’s unclear whether the proposed regulatory changes will immediately benefit Starlink or spark broader reforms in racial requirements that could deter foreign investments.
The South African government appears to overlook that many of these ownership targets could be achieved through regular investment and economic growth, rather than enforced regulations.
