Legislation: ICT equity ownership regulations out for comment

Draft regulations on ‘control and equity ownership by historically disadvantaged groups’ in ICT sector entities and the application of the sector’s broad-based black economic empowerment (B-BBEE) code of good practice were gazetted on Friday for comment by 3 April, notes Pam Saxby for Legalbrief Policy Watch. Their overarching objective is to ‘facilitate diversity and transformation’ across the ICT sector by promoting B-BBEE; prescribe how equity requirements for historically disadvantaged groups prescribed in the 2005 Electronic Communications Act should be applied; and provide for compliance verification. The development of the proposed new regulations was informed by input on a position paper issued by the Independent Communications Authority of SA in February 2019 following an inquiry begun in 2017.

Against that backdrop, matters addressed include the exemption of class licensees and ‘wholly owned state entities’ from the 30% equity requirement for historically disadvantaged groups prescribed in sub-section 9(2)(b) of the Electronic Communications Act; the implications of this requirement for individual licence applications; transferring control or ownership of a licensee; indirect ownership interest in a licensee; the implications for class and individual licence applications of codes of good practice applicable to the sector in terms of section 10 of the amended 2003 B-BBEE Act; and contraventions and penalties. A maximum penalty of R5m or 10% of a non-compliant licensee’s annual turnover is proposed.

An annexure to the draft regulations provides examples illustrating the method used in calculating ‘ownership interests held indirectly in a licensee through one or more intermediate juristic persons’. Given the significant implications of the proposed new regulations for recent licence applications and existing licensees, a transitional period of 24 months’ grace is envisaged in respect of applications received prior to their commencement but yet to be considered – with 50% compliance required of existing licensees within the first 12 months and full compliance within 24 months from the date on which the regulations take effect. With all this in mind, on a date yet to be announced, stakeholders will be given an opportunity to make oral submissions in support of their written input.