Draft Regulations in respect of the limitations of control and Equity Ownership by historically disadvantaged groups and the application of the ICT sector code

On 14 February 2020, ICASA published the Draft Regulations in respect of the Limitations of Control and Equity Ownership by Historically Disadvantaged Groups and the Application of the ICT Sector Code (the Draft Regulations).

The purpose of the Draft Regulations is to promote equity ownership by historically disadvantaged persons (HDPs) and to promote Broad-Based Black Economic Empowerment (BBBEE) with the view being to, amongst other things, facilitate diversity and transformation in the ICT sector.

In developing the Draft Regulations, ICASA took into account submissions made by industry stakeholders and the findings set out in the Findings Document and Position Paper on the Inquiry into Equity Ownership by Historically Disadvantaged Groups and the Application of the ICT Sector Code in the ICT Sector, as published by ICASA on 15 February 2019.

The Draft Regulations, inter alia, propose:

  • that a broad definition of "control" be adopted, which encompasses both direct and indirect control (as is the position under the Competition Act, 1998). In addition, the Draft Regulations include a definition of a "control interest" and state that a person will be deemed to have a controlling interest in a licensee if that person directly or indirectly has beneficial ownership of 20% or more of the issued share capital of a licensee;
  • to expand the definition of HDPs to include black people, women, persons with disabilities and youth, who before the Constitution became operational, were disadvantaged by unfair discrimination on the basis of race, gender, disability, sexual orientation or religion;
  • that individual licensees be required to ensure that their ownership equity held by HDPs is at least 30% (the Ownership Equity Requirement) at any given time during a license period - which Ownership Equity Requirement will apply to all individual licensees regardless of size or income level. Currently under the ECA, there is no ongoing obligation for an individual licensee to maintain the Ownership Equity Requirement;
  • that publicly trading/listed licensees be required to submit, on an annual basis, an independent assurance report indicating compliance with the Ownership Equity Requirement; and
  • that applicants submitting applications have a minimum of 30% ownership by black people (which must be maintained for the duration of the licence period) and a minimum of a level 4 BBEEE status.
  • The Draft Regulations also propose that non-compliance with the requirements relating to the Ownership Equity Requirement attract a fine not exceeding the greater of ZAR5 000 000 or 10% of the licensee's annual turnover.

ICASA has invited interested parties to submit written representations on the Draft Regulations by 3 April 2020.