After the Bell: Musk vs Mzansi - SpaceX challenges SA’s BEE rules

South Africa is caught between a rock and a hard place, both in respect of the big picture of geopolitics and the small picture of satellite internet.

Among all the crazy stuff that happened this week, one thing that slipped somewhat under the radar was that satellite internet provider SpaceX, which delivers Starlink, formally withdrew from the hearings that the Independent Communications Authority of South Africa (Icasa) was holding on its black economic empowerment (BEE) requirements. 

The hearings are a sequel to the meeting between President Cyril Ramaphosa and SpaceX CEO and global gizmibob Elon Musk. At the conclusion of the meeting in September last year, Ramaphosa said he had invited Musk, who, as everybody knows, was born in South Africa, to invest in SA. And at that point, the prospect of SpaceX operating its satellite internet in SA seemed very good. 

I won’t say how, but I happen to know someone who knows someone who knows what happened at the meeting. If this broken telephone is accurate, the subject of SpaceX internet was raised at the meeting, but the discussion lasted less than 60 seconds. Ramaphosa was explaining how legally it was necessary to participate, as South Africans say, in SA’s black economic empowerment. 

Apparently Musk said simply: “I don’t ever give away my equity. Change the laws.” Ramaphosa continued, and Musk said again: “Change the laws.” And that was that on that topic. 

The hearings by Icasa are actually part of the process of doing exactly that. I suspect the SA government would rather have SpaceX operating in SA, partly because getting cheap internet to rural areas on a saturated basis is just impossible using fibreoptic cable. Consumers in SA would definitely like SpaceX operating in SA because it is very good value compared with the rip-your-face-off data costs of the cellphone companies. 

Although SpaceX said it would no longer participate in oral presentations at the Icasa hearings, it has already made a written submission.

TechCentral reports that the written submission has not been withdrawn. It makes precisely the points which you might expect. SpaceX called on Icasa to rethink the rules requiring 30% broad-based black economic empowerment (BBBEE) shareholding.

“Many foreign satellite operators, particularly those with direct-to-consumer business models, have global policies that prevent local shareholding, thus excluding them from the South African market. This holds true even when these operators are willing to comply with BBBEE requirements and invest in initiatives that directly benefit the target communities,” the submission said.

“By aligning the licensing and ownership regulations with the ICT sector code – which recognises equity equivalent programmes as an alternative to local shareholding – Icasa could remove a significant barrier to foreign satellite operators. This would not only increase foreign investment in South Africa but would also create broader industry benefits, supporting innovation, competition and long-term growth,” said SpaceX.

Essentially, SpaceX is pointing out that a huge number of big tech companies that operate in SA – including Google, Microsoft, Meta, Oracle, SAP, you name it – are not forced to give away their equity, but are required to have “equity equivalents”. But cellphone companies are required to have 30% black equity ownership. So, in some ways, the argument is whether SpaceX is an ICT operator, or a communications company. 

Why is there this difference? I can tell you in one word: leverage. When the ICT sector code was being deliberated, the big international companies made it clear that they would not operate in SA if they were smacked with local shareholder requirements because if they give up in one country, then every country on the planet would follow suit. 

However, you might argue, lots of countries do in fact have local participation requirements, China being the most obvious and most onerous. But big US tech companies comply because, well, it’s China – it’s a huge market. They could all give SA a miss, and they would hardly notice. 

Cellphone companies, on the other hand, have to be individually licensed in SA and elsewhere and there is a huge, long list of very expensive requirements to get one of those licences. The licensing process is the reason SA and many other countries have an effective duopoly of cellphone operators, and why cellphone costs are so high in SA and around the world. And why, the cellphone companies would argue, we have a world-class service, underpinned by absolutely massive investments in cellphone infrastructure.

So, also at the Icasa hearings, representatives of the cell industry were squealing about how unfair it would be to allow SpaceX to operate without having to do that irritating BEE stuff, not to mention the huge on-the-ground investment. This argument is reflected all over the Africa continent where SpaceX is allowed. In Kenya, for example, the large telco Safaricom has openly said it wants SpaceX out of the country, or at the very least it wants SpaceX to operate – you guessed it – through a local provider.

The objection is laughable, partly because Safaricom argues that satellite operators pose a threat to mobile network quality (they don’t). But it also cites “national security”, appealing to the fear on so much of the continent that governments won’t be able to control the propaganda narrative. So far at least, the Kenyan government has resisted the pressure from local telcos, partly because Starlink had only a 1.1% market share in Kenya by June, compared with Safaricom’s 36.4%. Still, you can tell the telcos are freaked out by SpaceX, as they should be – and satellite direct-to-cell connections haven’t even started yet, but they are coming. 

So, as we all know now, Musk asked on his social media platform why SA still has “openly racist ownership laws”. And then US Secretary of State Marco Rubio announced last Thursday he was withdrawing from the upcoming G20 Summit in South Africa, citing the land law and its allegedly anti-US stance. And then Ramaphosa said at the State of the Nation address: “We won’t be bullied.”

SA is now caught between a rock and a hard place, both in respect of the big picture of geopolitics and the small picture of satellite internet. Odd that it should happen that way, but it has. The question now is what to do. DM