To sell internet access in South Africa, you first have to show ICASA the race of your shareholders. Sakeliga has now taken the regulator to the Pretoria High Court, but, oddly, not to scrap the 30% black-ownership rule. Chief executive Piet le Roux told Alec Hogg why he chose the narrower fight, why he is no fan of the "equity equivalent" escape route he is asking the court to open, and why he believes local ISPs and radio stations are next in line once Starlink's case is settled. He also answered the question critics keep asking about Elon Musk, explained why voters who tell pollsters they dislike BEE keep backing parties that defend it, and weighed whether a regulator defying its own minister could be the last straw for the GNU..Listen here.Edited transcript of the interview.Alec Hogg (00:02) Want to sell internet access in South Africa? Well, first you've got to show the regulator the race of your shareholders. Because ICASA says no licence without at least thirty percent black or historically disadvantaged ownership. It's not a points score, it's a gate. Starlink can't get through it. And maybe it was made to stop Elon Musk from bringing his revolutionary internet access facility to our country. But on the other hand, neither can a local ISP, internet service provider, whose owners possess what the government believes is the wrong skin colour, even if they were born long after apartheid ended.Sakeliga believes this is wrong and has now gone to the Pretoria High Court to see whether the law agrees. Oddly, it isn't asking the court to scrap the race test, only to make the state offer a costlier way around it. And that's one of the big questions that I have for Sakeliga chief executive Piet le Roux, who joins me now. But before we get there, Piet, what exactly does ICASA want?Piet le Roux (01:17) Look, ICASA wants to maintain this race-gating, race-restrictive scheme. Basically a quota that says if you don't meet the 30% local ownership threshold in your local operations, then international companies won't be able to provide telecom services. It actually applies that to local companies as well. What's going on here is that ICASA does have the option of offering alternatives, but it's looking for ways to interpret the legislation to suit its goals of race-restricting telecom service provision in South Africa.Alec Hogg (01:58) Now tell me a bit more about ICASA. I've got a personal axe to grind, full disclosure. I turned around three radio stations in South Africa. I had to do it for them because I could never get a licence, because my skin colour, according to the government, was wrong. That appeared to me to be a terribly racist and a non-commercial decision. But I thought those days were over. I thought we'd moved into a new era of more common sense, thirty years after 1994 and so on. Are they still playing according to the same scorebook?Piet le Roux (02:36) Well, what ICASA is doing is more or less in line with what most government departments and regulators are trying to do. They're trying to race-gate the economy. And we've actually seen an increase in that. We call it the third wave of BEE. Previously you mostly had to do some kind of ownership deal; BEE really applied to you if you were dealing in any way with the government. What's now happening is that it is increasingly being expanded as a licensing mechanism to do any economic activity at all.Now, sectors like mining and telecoms, and you can say fisheries, some go back twenty-something years with this race-gating. But what we're seeing in telecoms now, Alec, as you've attested to, is an acceleration. We're seeing an expansion of the scope of what it applies to. In fact, under ICASA's current interpretation, many licence renewals are coming up for local ISPs, local radio stations, local operators. I know people are mentioning Starlink, and it does affect Starlink, but ICASA's position is an example of what is going on across regulators in South Africa at the moment: race-gating access to the economy.Alec Hogg (04:00) So why are they doing this?Piet le Roux (04:03) Alec, you can say it's a combination of things. First, sectional interests. Of course, some people benefit a lot when, because of their skin colour, their race, they are put in a position where companies like Starlink make deals with them, or are expected to make deals with them. They get shares handed to them, or on very favourable terms they become partners to a business that they never would have been on the merits of their business acumen or their capital contributions. So there are sectional interests at play, in the sense that some people want to benefit.Alec Hogg (04:41) So do we get back to what Professor William Gumede said, those hundred South Africans who are just fleecing the system because they can make the laws work in their favour? Is that the interpretation?Piet le Roux (04:54) Yes, well, I think that's a major thing. A lot of people are skimming off other people's labour and higher prices for everybody else in the economy, and they're making money on the way down, and they find ways to rationalise that.Then there are people who insist on this even though they don't personally benefit from it, for ideological reasons. They rationalise it on the basis that it's some kind of regstelling, what would that be in English, some kind of...Alec Hogg (05:23) Retribution, maybe.Piet le Roux ...affirmation. Well, retribution certainly; some people would see this as a form of retribution, though that could be a negative way of framing it. Some would say it's a form of affirmation or rectifying previous exclusion. You can try to rationalise all of that in that way, but it still harms the purchasing power, the prosperity, of everybody in the economy. Some people choose ideology over a flourishing society. That's the second thing.And the third one is that some larger companies have bought into this over the last twenty years. You can see this in the submissions as ICASA asked for comments on its regulations over the last few years. Local companies were very resistant to these race-restrictive regulations, these ownership transfers. But once they started meeting the thresholds, having expended a lot of money, a lot of capital, to be compliant and get the licence, they understandably say: well, we want everybody else to pay that extra tax, that pay-to-play arrangement, as well.I'm sorry for the companies who've done this, but I don't think it's fair, having been robbed in a way or ripped off into some equity deal, to then want the rest of the country to suffer instead of just getting rid of the bad laws. So that's where Sakeliga comes in. We want to get back to a normal economy, not a race-gated economy.Alec Hogg (06:56) And so when is this regulation going to be put in? I recall that you went to court over the estate agents, and that was going to be horrifically impactful on many, many people's livelihoods, and you won that and turned that one around.Piet le Roux (07:14) Yes.Alec Hogg What about this one? If there's a little internet service provider sitting there with the wrong skin colour according to this government, when will they have to get rid of their business, or bring in new shareholders?Piet le Roux (07:32) Well, the licensing arrangements for different telecom service providers, where they are deemed to be regulated or have to apply for licences, those differ, so I don't want to give too general an answer. Fortunately, we found a way to attack what ICASA is doing. The first angle of attack, which you see in the papers now, will be followed by others, because we want to restrict the race-gating.The current case we're making is related to equity equivalent alternatives. Instead of just saying there must be 30% equity for foreign subsidiaries in South Africa to be licensed, we're saying that the Minister of Communications' directive last year should be taken into account by ICASA. And that, we think, should lead to equity equivalent alternatives, which means these companies don't have to give ownership away. They can pay to play in another way.It's not perfect. We don't think they should need to pay to play just because they're not black enough. But at least that is more beneficial to society here, and to those companies if they're willing to pay that extra. And once we achieve this, and we think we have a very good case, it will add momentum to what we can then insist on: if equity equivalence is available to foreign operators, why can't it be available to local operators? That's down the line. There needs to be a lot of litigation here and a lot of public resistance. It's only really down the line that we're going to be able to free local operators, because a wave of race restriction is heading their way as well.Alec Hogg (09:23) That would be a very good thing. That would actually reverse thirty years of craziness, because the whole of BEE as it was brought in, and I'm old enough and was in a position to see this up front right from the beginning, was expediency by business at the time, bringing in people they thought they could manipulate, perhaps, or "trust" in inverted commas. And equity equivalence, which has much more broad-based beneficiaries in South Africa, was just swept off the table. So if you were to go back thirty-four years and equity equivalents had been allowed back then, one can only imagine what a different country we'd be living in today.Piet le Roux (10:15) In a way, it would have been much better, that's true, Alec. And one can definitely find good things happening from equity equivalent alternatives. But I actually think equity equivalence is also a problem. I think there shouldn't be any race-gated additional payments or quotas on your ability to participate in the economy. Because you can say that part of equity equivalence is just tax. Tax is a form of equity equivalence; lower prices, better availability of goods and services.So why not just let people participate on equal terms in the economy? Why must the race of the ownership mean that they have to either part with some of the equity, or part with another financial form of what actually should have been invested into the products of the company? So I'm not a fan of equity equivalence. We also say this in our statement. But at least this will be more beneficial than the current quota system.Alec Hogg (11:20) And it might actually be more palatable from a realpolitik perspective. I'm not sure you're going to get your way on getting rid of race in our society, and I'll tell you why. I went yesterday to donate blood. I filled in the form, and on the form with the Western Province Blood Service, it asked me what race I am. Am I black, white, coloured or Indian? And I thought, now come now. Are you telling me that my blood is going to be different to a person who's got more melanin or less melanin than me? It is just insane, the depth to which race has taken over South Africa. But one step at a time, and I guess that's the message you're sending here.Piet le Roux (12:09) Look, Alec, race restriction by the state in South Africa, race-gating the economy, we are going to get rid of that. It's going to be partly a court effort. It's going to be partly a political effort. It's going to be partly a business ethics approach, where some people just cease co-operating with these requirements. It's probably going to take some international attention on the matter. And the timeline on that is probably still extended. But we're making progress.We won the case on the property practitioners, where estate agents, developers and bond originators were all going to be race-gated and licensed or not based on their race. That case has been won. We've won one on airlines locally, domestic air services. We've won on international air services, where they were putting race-gating in place. So Alec, I know it's not going to happen tomorrow, but let's get race-gating by the state out of the picture. It's a worthy thing to do, and it's possible.Alec Hogg (13:08) Why did you pick on this one in particular? Sakeliga has many opportunities, if you look at even blood donation services. Why did you pick ICASA as a target?Piet le Roux (13:26) Well, of course, one tries to find good bang for buck with the limited resources you have. We try to be judicious stewards of our funders' contributions. In the case of ICASA, what happened was that Minister Malatsi last year gave a policy directive. And in May this year, ICASA let Minister Malatsi know: we heard your directive saying that we should consider equity equivalence in terms of the ICT Sector Code and the BEE codes, but our interpretation, that's what ICASA said, is that the Electronic Communications Act says we must apply this 30% equity requirement.That's actually an error in law. So in our view, this is a very clear case where ICASA made an error in law, and that makes its decision reviewable. You already have the minister having told them the right thing to do, and they're refusing to do it. I guess the minister could also have brought this case, but we've brought it and it's now under review. So that's why we brought it. It's a good case to win.Fortunately, we have a lot of other cases coming. A lot of them have to do with BEE, but we also have a portfolio of other cases on a good business environment that are already launched and still coming.Alec Hogg (14:52) Your critics will be saying: hang on a minute, is Elon Musk behind all of this? Because he's a big beneficiary if it happens, with Starlink.Piet le Roux (15:03) Well, I hope he benefits. I hope that Starlink benefits. If Starlink benefits, lots of people in South Africa will benefit. I'm just making up a number here, but imagine a regulatory environment so good, so welcoming, that all internet cost half the price in South Africa with double the amount of access. That would be great. It would be the same if we removed a lot of BEE from the mining sector. We have a gutted mining sector in South Africa. And yes, if we rectified that, mining owners would benefit a lot, but most of the benefit would accrue elsewhere in society.So no, Sakeliga does this because we think it's a good case. As much as Starlink hopefully can benefit from this, I hope that in the end many other international companies benefit, and ultimately also South African operators, who really are at risk over the next few years of ICASA stymieing them, refusing to relicense them, refusing new licence issuance. So the benefit of this goes much wider than Starlink. We do this because it's a good case, it's part of our portfolio of cases, and it is a building block we need to lay.Alec Hogg (16:21) From the outside, it sounds like even when you get the political will to make a change, as has happened in this case, granted it's a DA minister, but still, there is the political will. Within the bureaucracy, there appear to be some pretty hard-baked ideas, as you've articulated to us here. Is that a correct reading?Piet le Roux (16:47) Look, there's deep commitment to this BEE stuff. Last year, after the Minister of Communications, Solly Malatsi, issued this directive, the ANC itself issued a statement objecting to it, saying he was moving beyond the scope of the Electronic Communications Act, which he wasn't doing. So it's clearly a deeply held commitment.In previous cases we won against BEE in procurement, big Constitutional Court cases two, three, four years ago, on behalf of the ANC came out with flaming statements against us. The Black Business Council keeps objecting to any progress we make. And someone at the Department of Trade and Industry, I forget his name now, made a big statement at the BRICS conference last year saying that BEE is not up for negotiation, transformation will happen on our terms, and so on.That's actually a sign of chinks in the armour. It's a sign of the edifice coming down, of people being on the defensive. As much as people are still publicly very committed to this, BEE is very much up for discussion, up for debate, in South Africa. That wasn't the case ten years ago. I'm very positive about BEE becoming a very delegitimised programme over the next few years.Alec Hogg (18:18) How do you read the message that voters have sent to the ANC in this local government election? There have been quite a lot of polls on whether BEE is good or not, and pretty much all of them seem to say: come on, get rid of this, we want the economy to grow, we don't need these hundred very special interests to continue getting richer and richer.Piet le Roux (18:45) There's a very big poll that happens every four or five years in South Africa, with a smaller one in between, called national elections and municipal elections. I know there's lots of intermittent polling with smaller sample sizes, and those polls show that people dislike BEE and so on. But when you do these big polls called elections, people keep voting for parties that are in favour of BEE. A lot of the ANC votes, for example, shifted to people like ActionSA. And just this week, Herman Mashaba came out saying he's in favour of BEE, just against the ANC's version of BEE. So it's not clear that voters, when they actually have to vote, vote against the transformationist agenda. That's a longer discussion. Why do people do this? People vote against their material interests all the time. People vote for ideological reasons. People vote out of habit. I don't have the answers for all of that. I know that getting rid of BEE and transformationism, this ideology that's very pernicious and harmful, and getting to a flourishing society will take some level of politics, some level of electioneering. But I think a lot of it will happen outside, in civil society and from independent business groups. And that's where we want to make our contribution.Alec Hogg (20:02) I'm surprised at Herman. Maybe he was misquoted, because this is the former chairman of the Free Market Foundation for a lengthy period, so it's quite clear where his views are.Piet le Roux (20:12) It's ambivalent. I'd say it's ambivalent; we can have a look at it.Alec Hogg (20:20) All right. But Telkom also came out this week to say, let Starlink into South Africa. How does that work, because Telkom is still part-owned by government?Piet le Roux (20:30) It's interesting. Economic reality and good business decisions keep bubbling to the surface as opportunities. I can't speak for Telkom, but I did see their statement, and they're not alone in having made submissions to ICASA to the effect that Starlink should be allowed into the country. People often think that preventing foreign entities from operating locally will somehow benefit infant industries or local operators. But economies are intertwined, and the best businesses are those that find ways to leverage good companies elsewhere, build new businesses with them, co-operate with them. So I'm not surprised that in this case a good business decision seems to have been taken at Telkom, realising there's upside in working and collaborating with Starlink. I don't know the reasons for the decision, but it was a very good sign.Alec Hogg (21:30) It's astonishing, really, if you look at that insulated argument. Imagine if we were blocked from all AI, how quickly South Africa would fall off the cliff with what's happening elsewhere in the world. When you look ahead, how long might this take? Clearly there's a lot at stake here, and the implications, as you've articulated, are significant. How long does the whole process run?Piet le Roux (22:00) It'll take at least several months, possibly a year or two, depending on appeals and so on. We do our best to accelerate things. It's early days, so let's see what ICASA comes back with. We'll also have to see what the Minister of Communications comes back with. He's a respondent. We're not asking for orders against him, because he's done pretty much the right thing with that policy directive. But it will be interesting to see whether he says we are wrong, whether he agrees, or whether he abides by the court's decision.So let's not worry too much about the longer timeline. In the next few weeks, even, we're going to see what notices the three respondents file. That'll be interesting by itself. And Alec, even if it does take a while, some cases we've fought for five years. We set aside important procurement restrictions, making much better value-for-money procurement possible, at least in municipalities and provinces that are not ANC-dominated. That court case took us five years. So we're able to stick it out. Our funders back us. And in the end we deliver good judgments with a pretty high win rate. It's not guaranteed, but it's much better than waiting five years, or three years, or two years, or another six months for something to pass through Parliament, and that's not going to happen anyway. The best is to get the litigation off the ground now.Alec Hogg (23:34) I've spent most of this week talking to politicians, so forgive me for this question. Gayton McKenzie said yesterday that we're at a watershed. He thinks the ANC is going to reject the DA but keep them in the Government of National Unity, because they're forced to stay there, according to him, because of their funders and because business says you've got to stay there, but actually the ANC is going to make the rules.What you're doing here sends a message, to a rational mind, that the really hard calls are now starting to be made. Because you have a minister, a DA minister, who says do this, and then a bureaucracy, ANC-dominated and informed by the party's cadres, saying no, we won't. So by going ahead with a court action like this, are you not maybe forcing an issue, forcing, dare I say it, a break in the Government of National Unity?Piet le Roux (24:35) I think there are lots of reasons why the current coalition government could break up, and there are probably even bigger reasons than us. So we're just part of the calculation. But certainly a smart politician would leverage our litigation where it suits his objectives. My understanding, at least from Minister Malatsi's directive, is that he wants there to be equity equivalent schemes. So it's up to them to deal with the facts. We're part of the calculus. And if it's important enough for a coalition government to fall because we brought the right court case, then maybe that coalition was not meant to be in the first place. But I doubt this would be the reason the coalition breaks up.Alec Hogg (25:31) It might just be the last straw, though.Piet le Roux (25:34) Well, then any little breeze would have blown it over anyway.Alec Hogg (25:39) Lots of moving parts at the moment, and we've got twelve more days of coalition negotiations. From where you're sitting at Sakeliga, what's your hope? What would be the best possible outcome of these negotiations? We know who the players are. And what would be the worst outcome?Piet le Roux (25:59) The best outcome would be one that serves a flourishing society. The object of states and the institutions around the state is to serve the common good. At Sakeliga, we don't pick sides between political parties, and we maintain our independence from the state. That's very important to us. We believe in a good constitutional set-up in the deepest sense. I don't mean the written words of the Constitution. I mean a constitutional set-up where there's actually a balance of power in society, where the different sectors of society can collaborate but remain independent from one another.So from our side, we don't get involved in coalition discussions and we don't pick sides, but we will hold to account all ministers, all political parties, all local and national governments, regardless of their composition, to the same standard: do they serve a flourishing society? From our perspective, we're interested in restoring the economic-order component of a flourishing society. So regardless of the outcome, our standards will remain the same.Alec Hogg (27:08) But restoring that economic order might be a long-term objective with short-term pain. Is that palatable to you?Piet le Roux (27:19) Well, it's certainly a long-term objective, and there's lots of short-term pain which we are already working through. Alec, short-term pain is, I mean, many people in South Africa are paying more than 50% tax if you count up VAT and income tax and higher fees and levies and so on. I think it's very important to fight against that. Sometimes you have to shoulder part of the cost of doing that right now. It has to be done.Alec Hogg (27:54) Piet le Roux, always lots of wisdom and common sense. He's the chief executive of Sakeliga, and I'm Alec Hogg with your business edge..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox every morning on weekdays. Register here.Support South Africa's bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here.