Draft Regulations – Equity Ownership by Historically Disadvantage Groups (HDGS) operating in the ICT Sector Code

Reference documents:

Gazette 43021 of 14 February 2020 – Draft Regulations for Equity Ownership in the ICT Sector
Gazette 40407 of 07 November 2016 – Revised ICT Sector Code
ICASA Act No. 13 of 2000
Electronic Communications Act No. 36 of 2005
B-BBEE Act No.53 of 2003

ICASA’s proposed draft regulation for Equity Ownership in the ICT Sector has come to the fore again in a recent Parliament session.

In Gazette 43021 of February 2020, a draft regulation for public comment was published with an aim to have it finalised and promulgated before year-end 2020.

This regulation came about from a study undertaken into Equity Ownership by HDSA’s (historically disadvantaged South Africans) in the ICT Sector and was published in February 2019 with an outcome from ICASA that the ICT Sector Code requires further promotion of B-BBEE and equity ownership by historically disadvantaged groups.

The purpose of these regulations is to promote equity ownership by HDGs (Historically Disadvantaged Groups and has the same meaning as Historically Disadvantaged Persons) and to promote B-BBEE. In achieving this, these regulations will:

Facilitate diversity and transformation in the ICT sector by prescribing the implementation of revised ICT Sector Code;
Prescribe the application of the HDG equity requirement; and
Provide the manner in which to verify compliance with HDGs and B-BBEE requirements.

The draft regulations seek to impose the strict conditions on telecoms licensees such as ISPs and telecoms operators, which include:

A requirement for all existing licensees to comply with the mandatory equity ownership requirements – 30% equity ownership by black people and Level 4 B-BEEE status – within 24 months of the promulgation of the regulations. Each application for a licence must be accompanied by a B-BBEE verification certificate. A requirement for annual compliance reporting on the state of equity ownership by black people in the licensee by use of the flow through principle. A licensee must ensure that its ownership equity held by black people is not lower than 30% at any given time during the licence period.

Penalties of up to R5 million or 10% of the licensees’ annual turnover where a licensee fails to maintain the mandatory minimum requirement.

Below are two extracts form Gazette 43021 describing Ownership calculations.

Source: Government Gazette 43021 dated 14 February 2020

Author Craig Tonkin

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