Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
South Africa has proposed new legislation to meet Elon Musk’s conditions for offering his Starlink satellite internet service in his birth country after the billionaire refused to comply with Black empowerment laws he called “openly racist”.
Days after a bruising meeting between South African President Cyril Ramaphosa and his US counterpart Donald Trump in the Oval Office, Pretoria moved to loosen affirmative action laws requiring foreign investors in telecoms to sell 30 per cent of equity in their local entity to historically disadvantaged groups in order to qualify for operating licences.
On Friday, communications minister Solly Malatsi proposed companies could instead invest in “equity equivalence programmes” — such as signing up local suppliers, creating a certain number of jobs, or financing small businesses. The proposal will be open to public comment for 30 days.
The government said the proposed change would not exempt companies from “transformation obligations”, but provide them with a workaround to “contribute meaningfully to equity, skills development and economic inclusion”.
The new requirements “seeks to provide the much-needed policy certainty to attract investment into the . . . sector,” Malatsi added.
Musk, one of Trump’s closest advisers, has long complained that the current rules put him in an “absurd situation where I was born in South Africa but cannot get a licence to operate in South Africa because I am not Black”. Officials say he has not formally applied for a licence for Starlink, which is owned by SpaceX, a US-registered company.
Other international telecoms operators in the country, such as Vodafone’s local unit Vodacom, have sold shares in local subsidiaries to Black investors to comply with existing rules.
Black empowerment policies have long been championed by the governing African National Congress to address racial inequalities created under apartheid. The proportion of businesses that are Black-owned rose to 60 per cent by 2022, doubling since 2019.
But critics say the requirements are often a box-ticking exercise, and they have been abused by corrupt businesses and politicians to benefit an elite few while deterring much-needed foreign investment.
Malatsi told the Financial Times in February that equity equivalent exceptions could help “in expanding broadband connectivity to the quarter of our population which does not have access to the internet, while grappling with the reality that the current legislation doesn’t cover for that”.
Pressure to loosen the legislation accelerated after the high-octane meeting at the White House on Wednesday, in which Trump railed against South Africa’s “race-based laws”, which he claimed were driving an exodus of white Afrikaners to the US. Musk later attended a working lunch with both presidents.
Last month, neighbouring Lesotho granted Starlink a 10-year operating licence in a bid to ease a blanket tariff of 50 per cent imposed on the country by the US.
Analysts in South Africa largely praised the equity equivalence proposal for telecoms, which echoes policies already in place in some other industries including the car sector.
“If you look at a service like Starlink, this would be of huge benefit to rural communities,” said Ralph Mathekga, an independent political analyst based in Johannesburg. “It is unjustifiable to simply demand compliance with Black empowerment rules when this would harm the rest of the country.”
Starlink has proved popular in other African countries with rural areas lacking traditional broadband connections. Politicians have lobbied for Starlink on the basis that it would assist with education, health and other social services. In 2023 only 1.7 per cent of the rural population had internet access at home, according to government data.
Still, the proposal is already attracting fierce criticism that the country is bending the rules on a staple policy simply to accommodate Musk.
Julius Malema, the leader of the radical leftwing party the Economic Freedom Fighters, said he would “oppose Starlink in parliament” as Musk had peddled the debunked idea that there was a “white genocide” taking place in South Africa.