Issued by Ismail Joosub on behalf of the FW de Klerk Foundation on 07/02/2025

The intersection of South Africa’s Black Economic Empowerment (“BBBEE”) laws and Elon Musk’s global business ventures presents a pivotal moment for the country’s economic future. Musk’s Starlink satellite internet service has the potential to address one of South Africa’s most pressing issues: The digital divide. By providing affordable internet, particularly to underserved, rural communities, Starlink has the potential to change the landscape of South Africa’s digital economy. However, like many foreign companies looking to enter South Africa’s market, Starlink faces a significant regulatory challenge: BBBEE laws require international communications companies to have 30% black ownership.

This requirement, as a part of South Africa’s Broad-Based Black Economic Empowerment (“BBBEE”) Act of 2003—which seeks to redress the legacy of apartheid and foster economic inclusion—presents a barrier for companies like Starlink that are structured for global operations. However, a potential solution lies in the Equity Equivalent Programme (“EEP”). The EEP allows foreign companies to meet BBBEE obligations not through direct ownership, but by investing in projects that benefit black-owned businesses and underrepresented communities. This alternative route could enable companies like Starlink to enter South Africa’s market while contributing to the economic transformation outlined in our National Constitution.

This is more than just a regulatory conversation, it’s about how South Africa’s economic future will unfold in a way that is both inclusive and sustainable. And it is a conversation that is happening now, as the government begins to explore extending the EEP to multinationals seeking an Electronic Communications Network Service (“ECNS”) licence. The relevant Electronic Communications Act of 2005, in section 9(2)(b), stipulates that international communications companies must include a minimum of 30% black ownership (or higher, as prescribed) when applying for licences in South Africa. This provision is part of the country’s efforts to promote transformation within the sector, ensuring broader participation in the economy.

The Case for EEP Over BBBEE

The case for expanding the EEP, instead of relying solely on BBBEE, is both practical and principled. The Constitution envisions a non-racial, inclusive society where transformative policies are designed to address past wrongs without creating new forms of exclusion. This vision has often been challenged by the realities of BBBEE implementation. While the intention behind BBBEE was to ensure black South Africans had access to meaningful economic participation, the policy has not always lived up to its promise.

The Zondo Commission’s revelations of state capture exposed how BBBEE was sometimes hijacked by a politically connected elite, diluting its intended purpose of empowering the majority. Instead of transforming South Africa’s economy, BBBEE, in some instances, became a tool for a few to accumulate wealth and power.

This is where the EEP offers a refreshing alternative. By encouraging companies to invest in long-term socio-economic projects, rather than simply meeting ownership quotas, the EEP supports the true spirit of empowerment. The focus shifts from tokenistic ownership deals to sustainable investment in communities, including funding for local black-owned businesses, creating skills development programmes and offering digital infrastructure in underserved areas. These are tangible, lasting changes that create opportunities for economic participation beyond just ownership.

Moreover, global companies have already demonstrated how the EEP can lead to meaningful transformation. Amazon has invested in ICT training programs and grants for black-owned businesses, while JPMorgan’s Abadali Fund has empowered black entrepreneurs in the financial sector. Even Google has set a precedent by contributing R180 million in advertising credits and training programs for small businesses in South Africa. Pepsico has made R600 million available for the development of black farmers to supply them with certain products, such as raisins and potatoes. These initiatives go beyond simple compliance with the law; they embody real empowerment and sustainable economic growth.

The contrast with traditional BBBEE, which often focuses narrowly on ownership, couldn’t be starker. While ownership remains an important marker of empowerment, it is not the sole measure of success. The EEP allows companies like Starlink to contribute to South Africa’s growth in ways that are more in tune with the country’s constitutional values. It fosters inclusive growth by directly benefiting communities that need it most, without relying on ownership quotas that may not always lead to the desired outcomes.

Musk, Trump and the Broader Context

The conversation around Starlink’s entry into South Africa has not just drawn attention from policymakers, but also from some high-profile international figures. Elon Musk, in particular, has found himself at the centre of a diplomatic row between South Africa and the United States. Recently sworn in US President Donald Trump sounded a (false) alarm over South Africa’s land reform policies, including expropriation without compensation. These comments, which threatened to cut US funding to South Africa, have added fuel to an already heated debate on South Africa’s transformation policies.

While the issue of land reform is separate from Starlink’s business in South Africa, the underlying tensions are telling. Musk’s frustration with South Africa’s policies, especially in relation to ownership laws, echoes broader concerns about the regulatory environment in the country. There’s a clear sense that international businesses, like Starlink, may struggle to navigate South Africa’s complex transformation policies, even if their intentions are aligned with South Africa’s goals for digital inclusion and economic development.

President Cyril Ramaphosa, however, responded with characteristic diplomacy, reaffirming South Africa’s commitment to its constitutional values of fairness, justice and equality. In his conversation with Musk, Ramaphosa made it clear that South Africa’s approach to economic transformation was rooted in the Constitution, which mandates that policies must work to heal the divisions of the past. These principles cannot be compromised, no matter how much foreign investors may feel the pinch of regulatory requirements.

The tension between attracting foreign investment and achieving true transformation highlights a crucial point: Policies must be balanced, fair and forward-thinking. Transformation cannot simply mean pushing foreign companies out or forcing them into ownership deals that don’t serve the broader purpose of economic upliftment. The Constitution mandates that transformation policies promote the full and equal enjoyment of all rights and freedoms, as outlined in section 9(2), which allows for measures to protect or advance persons disadvantaged by unfair discrimination, ensuring equality and non-discrimination. These goals can be achieved with models like the EEP, which allow companies to participate in the growth of South Africa while still remaining true to the country’s constitutional principles.

The Path Forward?

The way forward is clear. South Africa needs an approach that marries its constitutional values with its economic realities. The EEP offers an opportunity to do just that. By enabling companies like Starlink to invest in local empowerment initiatives—whether through skills development, infrastructure projects, or support for black-owned businesses—South Africa can foster a truly inclusive economy. This approach ensures that businesses, both local and international, can contribute to a more equitable society without being bogged down by rigid ownership quotas that may not always be practical or beneficial.

In the end, the question is not whether South Africa should welcome companies like Starlink, but how it can do so in a way that reflects its constitutional commitment to economic justice and equality. Through models like the EEP, South Africa can create a future where businesses thrive and all South Africans benefit from the country’s economic growth, thus achieving real empowerment and not just compliance.