The Independent Communications Authority of South Africa (“ICASA”) has recently published draft legislation on how it intends to prescribe equity ownership of Historically Disadvantaged Groups (“HDG”), and more specifically Black people, as it appears in the ICT Sector Codes.
In order to receive a new license or retain or take transfer of an existing license, the legislation will require the license holder to be at least 30% Black owned.
This legislation was available for public comment until 3rd April, unless this deadline has been impacted by COVID-19. Thereafter it is likely to be promulgated and come into immediate effect soon after Parliament reconvenes.
The legislation has an impact on all existing licenses and applications for individual licenses, including applications, transfers, renewals and amendments.
Ownership Requirements
ICASA clearly sets forth its position with regards to equity ownership and how it will implement and promote the requirements of the ICT Sector Codes, which are in line with the ownership requirements of the Electronic Communications Act.
The new regulations stipulate that all new applications, transfers renewals and amendments will be required to demonstrate at least 30% equity ownership by Black people, and be at least a Level 4 contributor.
All applications received prior to the promulgation of these regulations will have a 24-month transitional period in which to comply.
Crucially, existing license holders will also need to comply with the requirement of 30% Black ownership within a 24-month period. Existing license holders will need to achieve50% of the target (15% Black equity ownership) within the first year.
Once achieved, equity ownership by Black people will not be not permitted to drop beneath the 30% level at any stage during the license period. Should the percentage of Black ownership fall below 30 during the license period, the company will be subject to a fine not exceeding the greater of R5,000,000 and 10% of company’s annual turnover.
Penalties
In addition to the usual penalties for “Fronting,” the Draft Legislation proposes a penalty not exceeding R5,000,000 or 24 months in prison for any person submitting, “False, inaccurate or misleading information.”
