Critics question the legality of exempting Starlink from B-BBEE rules, citing unfair treatment of other foreign firms.
If Elon Musk’s Starlink satellite internet service is exempted from local rules on broad-based black economic empowerment (B-BBEE), it would be “surrendering South Africa’s sovereignty” to the American tycoon.
This is the view of political economist Dale McKinle, who added: “It’s wrong in principle, it’s wrong in practice. The reason is that it sets a precedent for bending the rules simply because someone is wealthy.”
Starlink’s proposed deal ‘wrong in principle’
He said the fact that it involved a high-profile individual like Musk, who has a close relationship with US President Donald Trump, was itself a problem.
“It smacks of bullying. It’s basically bending over backwards because we’ve been threatened, because people involved have lots of political and economic power,” McKinley said.
He said the move would “please some racists and bullies”, and open an opportunity for a rethink on the B-BBEE itself.
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McKinley said the proposed change to the B-BBEE approach “would fundamentally change the B-BBEE situation”.
He said the policy itself was not wrong per se, but there were some problems with its applications. He suggested rethinking B-BBEE so that it benefits ordinary people rather than the elite.
The debate around Starlink’s possible exemption from adhering to B-BBEE rules is set to intensify as Communications and Digital Technologies Minister Solly Malatsi was summoned by the portfolio committee on communications and digital technologies to appear before it today.
Minister summoned by committee
The committee believed Malatsi’s approach was in contravention of the Electronic Communications Act, which required B-BBEE to be applied by licensees in the sector.
Several organisations promised to challenge the plan to allow Starlink to operate outside the B-BBEE policy in court, based on contravention of the law, including constitutional provisions on equality. Starlink was envisaged to roll-out connectivity, particularly in rural areas of South Africa.
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Malatsi proposed alternative empowerment strategies for investments in the information and communication technology sector, including equity equivalent investment programmes (EEIPs) which could mean investment in local infrastructure or small black-owned businesses.
Independent political analyst Sandile Swana said B-BBEE was a law in South Africa that could only be changed or abolished by parliament.
“You can say B-BBEE will end if you are confident that 51% of parliamentarians want it abolished,” said Swana.
Law can only be changed by parliament
“Right now, the ANC is the only party that can end B-BBEE in South Africa. But if you are sure that the ANC is ready to end B-BBEE before 2029, that is fine; B-BBEE will then end.”
Swana said at least 22 American companies, including Microsoft, Amazon and Ford – that had invested in South Africa for many years – complied with the country’s B-BBEE laws without any qualms. He said those firms would be envious of Starlink being given preferential treatment by the government.
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The telecommunications sector is bound by the Electronic Communications Act – under which the Independent Communications Authority of South Africa (Icasa) was established – which states there must be B-BBEE shareholding for any licence issued.
“So, if you are going to hold a licence in that space, you must have black shareholders, whether you are a broadcaster or a telecommunications company,” said Swana.
“Since Starlink fell under the Icasa ambit, it should make a deal with Icasa that conforms with the Act.”
Sector bound by Electronic Communications Act
However, specialist website TechFinancials reported last week that EEIPs have been activated in major investments in this country by US companies IBM, Microsoft and Amazon.
The website said foreign companies often cannot transfer direct ownership, so the EEIPs would be approved by the department of trade, industry and competition to earn B-BBEE points. Firms earn full ownership points for approved initiatives.
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