Soon, tech startups in South Africa must compulsorily each leave 30% of their equity shareholding to black people and other disadvantaged persons. This is according to the Independent Communications Authority of South Africa (Icasa) which has published new draft employment equity regulations for the ICT sector.
‘‘The purpose of the draft regulations is to ‘promote equity ownership by Historically Disadvantaged Persons and to promote Broad-Based Black Economic Empowerment (B-BBEE)’, Icasa said.
The group said it plans to introduce these changes through:
The implementation of a revised ICT sector code;
The application of a Historically Disadvantaged Persons (HDG) equity requirement;
Provide the manner in which to verify compliance with Historically Disadvantaged Persons and B-BBEE requirements,’’ the draft regulations reads in part.
Here Is All You Need To Know
- According to the new regulation on any application, an Individual Licensee is required to provide the Authority with proof, by way of a certificate from a recognised and accreditated verification agency, confirming its ownership equity (shares) held by the Historically Disadvantaged Persons (HDG), which may not be lower than 30%.
- Under the new regulations, the 30% HDG equity requirement is applicable to all individual licensees of the Independent Communications Authority of South Africa (Icasa), regardless of their size and income level.
- The new 30% HDG equity requirement applies to all sorts of applications pertaining to individual licenses, including new applications, transfers, renewals and amendments.
- The only class of persons to be exempted from the new regulations are a persons with class licenses and wholly owned state entities.
- The proposed South Africa ‘s equity regulation defines black people as African, Coloured and Indian People who are citizens of South Africa by birth or descent or who have become citizens of South Africa by nationalization before 27 April 1994, or on or after 27 April 1994 and who would have been entitled to acquire citizenship by naturalization prior to that date.
- Notably, the regulations also introduce strict punishments for non-compliance including a fine not exceeding R5 million or 10% of the company’s annual turnover.
- Icasa said that compliance by existing licensees with these regulations is required within 24 months of being published.
Big employment equity shake-up
South African businesses are also preparing for planned amendments to the Employment Equity Act (EEA) which promise a number of significant changes to the country’s employment equity laws.
Announced by Labour minister Thulas Nxesi in July 2019, the amendment bill will regulate the setting of sector-specific employment targets to address the gross under-representation of blacks, women and persons with disabilities.
It will also ensure that an employment equity certificate of compliance becomes a precondition for access to state contracts.
A draft version of the bill published at the end of 2018 indicated that the changes being were made to speed up transformation.
The bill states that while the public sector has seen significant changes, the private sector continues to lag behind.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer.
He could be contacted at udohrapulu@gmail.com