On 31st March the Independent Communications Authority of South Africa (ICASA) published gazetted regulations (PDF) surrounding the ownership requirements of ICT companies wanting licensing access. More specifically, said companies would need to address their B-BEEE status, with Level 4 required among other stipulations should they wish to keep their license.
For now a grace period is available, but as Deon Oberholzer, CEO at Gestalt Growth Strategies explains, ICT firms need to act as swiftly as possible to meet the new ICASA requirements.
“Ownership is an aspect of B-BBEE that companies in the ICT sector may have neglected and many have relied on their compliance with the 30% HDG (Historically Disadvantaged Groups) ownership requirement. Now, licensees must have HDG participation at 30% as well as 30% black participation in order to comply with the new regulations and qualify for a license,” says Oberholzer.
The new definitions
In order to better understand the intricacies of the requirements, Oberholzer first unpacks the definition of HDG. Here they are defined as including Black people as outlined in the BEE Act, but the definition also includes all women, people with disabilities and youths who are citizens of South Africa, irrespective of their race or age.
The CEO adds that these new requirements specifically state that a licensee must have a minimum of 30 percent of its ownership equity held by HDGs, and 30 percent of its equity held by Black people, determined using the Flow Through Principle. For those unfamiliar the Flow Through Principle means that this 30 percent ownership must be 100 percent Black and may not have any White or non-qualifying Black participation.
The new ICASA requirements effectively void the requirements on HDG as it only focus on the Black component of the definition, according to Oberholzer.
“We anticipate that ICASA will stand firm on the ownership requirement, even if it does allow progression of companies from Level 7 to Level 4 by other means. Simply having 30% of ownership held by HDGs is not going to suffice anymore. Licensees are going to have to urgently relook at their B-BBEE strategies and start taking steps in the right direction to comply if they want to retain their licenses,” he stresses.
Generic licensees now have 36 months to show compliance, but as Oberholzer warns, relying on the grace period is short-sighted and could turn out to be very risky.
“Companies that don’t currently comply will be under pressure when it comes time to submit their annual reports to ICASA, which may frustrate or delay the process if licensees are not compliant from the onset,” notes the CEO.
“We recommend that current and prospective licensees start looking at their B-BBEE compliance now. By meeting the 30% black ownership and Level 4 requirements in their current financial year, they can protect their companies from this,” he advises.
For those companies who do not meet the new requirements and are scrambling in order to do so, Oberholzer emphasises the importance of having a strategy bedded down first before any further steps are taken.
“Don’t panic. With a properly structured 30% black equity ownership plan, achieving Level 4 is possible, even for small businesses. Focus on setting your strategy. Following that, you can start implementing and preparing for verification before the grace period ends,” he concludes.