Real transformation without BEE scores via Malatsi directive

Minister of Communications and Digital Technologies Solly Malatsi's policy directive to ICASA to relax BEE requirements in its licensing regulations marks an inflection point in the rise and fall of BEE.

Minister Malatsi’s actions partly follow IRR Legal’s recommendation in its formal submission to the earlier draft policy directive.

IRR Legal urged Malatsi’s department to recognise that its stated mission “to attract investment” could be achieved regardless of the race of investors in South African growth.

BEE impedes investment, so relaxing BEE is a very simple way to grow investment. IRR Legal showed how this could be done immediately, practically, and legally.

Furthermore, IRR Legal submitted that the government’s stated purpose of increasing internet access, particularly in rural areas formerly devastated by apartheid spatial planning, could be achieved by relaxing BEE.

BEE slows growth in rural areas, so relaxing BEE helps overcome the legacy of apartheid.

Minister Malatsi’s order to relax BEE regulations is, in this context, welcome.

However, Malatsi did not remove all regulatory impediments to growth in his department. Rather, he only confronted the Ownership Regulations, which were adjusted by ICASA to tighten BEE in 2022.

Malatsi’s policy directive states that this tightening of BEE was “not permissible in law, nor is it desirable as a matter of fact”.

These strong words mark a turning point in the rise and fall of BEE, as never before has a ministerial directive so starkly and sweepingly cut back a BEE regulation.

The closest precedent is Treasury’s previous exemptions from BEE for specific projects in public procurement. However, Malatsi’s directive is more broad-based and long lasting.

It is no surprise that there has been a pro-BEE backlash among some of the rich and powerful.

“These policy directives are an affront to the centuries' old fight for equity and redress by the black majority in this country,” said Khusela Sangoni Diko, who chairs the parliamentary committee that oversees ICASA. The ANC and EFF have also spoken out against the directive to relax BEE.

Diko says Malatsi is guilty of “undermining existing law and Parliament”. All critics claim that Malatsi is improperly using a minister’s powers to reshape the law.

IRR Legal anticipated this in its July submission and explicitly recommended what steps the minister could take to avoid this problem.

Section 6 of the Electronic Communications Act states that ICASA can exempt satellite internet service providers from licensing requirements if BEE is impeding investment. This makes it clear that Parliament’s intention in passing the law was to let ICASA exempt investors from regulatory requirements, including BEE requirements, when red tape blocked growth.

IRR Legal asked Malatsi to make this point explicit in his policy directive, so that uninformed people would not falsely accuse him of circumventing the law. His failure to do so points to the reluctance of South African politicians to promote growth policies unambiguously.

In practical terms, South Africans should know that there is no need for a delay in letting in Starlink. If ICASA wants to promote inclusive growth in rural South Africa it can open the gates to Starlink without delay through granting an exemption, as explicitly provided for in law. The same goes for all similar service providers.

All delays have been, and remain, unnecessarily harmful to South Africans seeking opportunity.

Media contact: Gabriel Crouse, IRR Legal Executive Director Tel: 082 510 0360 Email: gabriel@irrlegal.org.za

Media enquiries:

Anneke Burns

IRR Public Relations

+27 71 423 0079

anneke@abpr.co.za