Starlink’s BEE headache

Uncertainty over new black economic empowerment (BEE) regulations and existing historically disadvantaged ownership requirements in the telecoms industry could be behind Starlink’s reluctance to launch in South Africa.

The fast and uncapped low-earth orbit satellite Internet service has been described as a game-changer for those using its roaming subscription in South Africa, particularly in rural areas which previously had limited or no Internet access.

When Starlink opened global pre-orders in February 2021, its estimated launch date in South Africa was 2022.

Two months later, the Independent Communications Authority of South Africa (Icasa) told MyBroadband that Starlink would need to comply with contentious new black ownership regulations — then still in draft.

These required that telecoms licensees had a minimum of 30% ownership equity held by black people. In addition, licensees would be required to have Level 4 BBBEE status.

These rules would function on top of a years-old Electronic Communications Act rule determining that licensees needed to be 30% owned by historically disadvantaged groups (HDGs), including black people, women, people with disabilities, and youth.

“An Individual Licensee must comply with both the black equity requirement and the HDG equity requirement,” Icasa said.

However, in the final regulations, Icasa suspended the new 30% black equity rule pending the announcement of a future commencement date and “regulatory and legislative steps”.

These included confirming with the Department of Trade, Industry, and Competition that the rules complied with South Africa’s Broad-based BEE Act.

Although Icasa said it would announce a future commencement date for the rule, it has remained silent on this for over three years, leaving network operators and Internet service providers (ISPs) in limbo.

The new rules have been criticised heavily by telecoms industry players and experts, who warned they would have a disastrous impact.

One ISP executive said he was completely opposed to BEE because it led to fronting, which inflated customers’ prices.

Following these developments, Starlink delayed its ETA for a South African launch by one year in November 2021.

In September 2022, Starlink updated the launch timeframe to “unknown”, which has remained the status until today.

Meanwhile, four of South Africa’s neighbours have already launched or approved Starlink.

Starlink has also launched or has a launch timeframe in several African countries with stringent local ownership rules, including Kenya.

Starlink silent on specifics

Starlink has not explicitly confirmed whether the BEE or HDG rules are the reason why it delayed the launch window for the service, despite numerous queries from MyBroadband over the past few years.

However, Starlink’s enterprise sales head Phillip van Essen previously told Mining Weekly that the company prioritised rollouts in countries which made doing business and getting regulatory approvals easy.

“We respect that every country has their own process…and have a dedicated team that is focused on regulatory efforts globally, including South Africa,” said Van Essen in May 2023.

“We’re hopeful that we can resolve the issues and start service here soon, as well as in other African countries.”

Regardless of the implementation of the black ownership rule, the existing HDG requirement is already a hurdle.

Starlink’s parent company, SpaceX, has a complex ownership structure that includes its biggest shareholder — founder and CEO Elon Musk — as well as a myriad of large investment firms and tech companies.

Establishing the demographics of these shareholders is not required in the US and would likely be a time-consuming, potentially complicated, and invasive exercise that outweighs the immediate benefits of launching in South Africa.

Typically, international companies that want to offer their products and services in South Africa partner with a local entity that already meets the requirements.

Starlink has been adamant about primarily serving customers directly instead of using resellers, as this gives it more control over prices and customer service.

However, it appears this was a compromise the company was willing to accept in Zimbabwe.

Starlink’s approval in that country came after an agreement that the service would be made available through a private local company, IMC Communications.

Several Zimbabwean publications have reported that IMC Communications is owned by the controversial Wicknell Chivayo, a benefactor of Zimbabwe’s ruling party — ZANU-PF.

Chivayo is well-known in Zimbabwe for his lavish lifestyle and connections to influential figures in Zimbabwean politics, and has been accused of involvement in several dodgy government deals.