What the new BEE changes mean for South Africa’s ICT industry

The Independent Communications Authority of South Africa (Icasa) has published new draft regulations for the ICT sector, promising a big shake-up for the industry.

The draft regulations propose to set new broad-based black economic empowerment (BBBEE) ownership requirements over and above the targets that apply under the BBBEE Act.

The regulations also propose that licence applicants and licensees applying for approval to transfer, amend or renew an individual licence must be 30% owned by persons from historically disadvantaged groups (HDPs). Licence applicants must then also maintain 30% ownership by black people and achieve level 4 BBBEE status.

These regulations are quite far-reaching as affected ‘licensees’ and ‘licence applicants’ include mobile network operators, ISPs and broadcasters amongst other companies.

“The draft regulations look to impose two sets of requirements,” said Livia Dyer, a partner at law firm Bowmans.

“First, they say that licence applicants and people applying to renew their licences will have to have 30% ownership by historically disadvantaged persons (HDPs).” This category includes but is not limited to black people, she said.

“This is already a requirement under the regulatory framework. What is new is that individual licensees will have to have 30% HDP ownership through the whole licence term rather than only when they apply to Icasa to get a licence or for permission to do something,” Dyer said.

“Second, the draft regulations contemplate that licence applicants will have to be 30% owned by black people and then go on to say that licensees will have to ensure they are 30% black-owned during the whole licence period.”

Dyer said that a licensee that does not comply can have a finding made against it by Icasa’s Complaints and Compliance Committee, which presumably would include an order to comply with the BBBEE ownership requirement.

The regulator could also impose a possible fine of the greater of R5 million or 10% of annual turnover and refuse to renew the licence of a licence-holder that does not comply with an order of the CCC, she said.

How companies need to prepare

The draft regulations are subject to a comment process which means they could be amended before they are finally published by Icasa.

If licence-holders are concerned about the possible impact of the regulations, they should participate in the public comment process, said Dyer.

“Once the regulations are adopted by Icasa and assuming the proposed requirements are maintained, licence holders will need to change their ownership structures and where necessary increase their percentage Black ownership within 24 months,” she said.

“Importantly, under the current draft, any acquisition by BBBEE or other shareholders of 20% or more of the shares in a licence-holder will be scrutinised by Icasa and will require Icasa’s prior consent.”


Read: South Africa’s major new BEE laws get the green light

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What the new BEE changes mean for South Africa’s ICT industry