Starlink: Is South Africa really so special?

By R.W. Johnson

There is currently much discussion of the proposed “equity equivalent” scheme being proposed for international hi-tech investors such as Elon Musk’s Starlink. Much opposition has been voiced by those who wish to see Black Economic Empowerment as a sacrosanct part of the South African system, while others frame the question as one of national sovereignty: why should South Africa have to change or modify its laws simply to suit international investors ? Meanwhile there is also discussion of the various things that someone like Musk should be asked to do in lieu of providing 30% BEE ownership of his company. There is talk of large training schemes, of Musk helping to renovate hundreds or even thousands of schools, and so on.

I hold no brief for Musk, but reading about this has made me wonder what I would do in his place. I think he was absolutely right to say that he would not be prepared to give away 30% of his company – which is effectively what the 30% BEE requirement means. In practice there simply aren’t enough black investors with the necessary capital to buy 30% of the shares in the South African company which Starlink would have to set up. And, let us be frank, there are also very few black businessmen with the technological sophistication to make any meaningful contribution as directors of such a company.

As we know, such obstacles have previously been met by such ludicrous schemes as investor companies “lending” the necessary capital to their BEE investors and then having to put up with BEE directors who know nothing of the business and make no real contribution to it. It is, in other words, hardly surprising that international investors cite the BEE requirements as the chief obstacle to their investing in South Africa.

I think if I were Musk I would say “No, thank you” to any equity equivalent scheme. Of course, any sensible company wants good public relations, so Musk might want to endow some scholarships or set up a department of astronomy at a leading university – or even offer opportunities to young qualified South Africans to come and work at Tesla, his AI venture or SpaceX. But, were I him I would, for several reasons, refuse any government-provided package specifying where and in what he ought to invest. After all, one is talking here about what is essentially an act of philanthropy and the philanthropist, not the government, should have the decisive say about how he wishes to spend his money.

Secondly, I wouldn’t want to get involved in elaborate training schemes or programmes involving local schools because these are not core competencies or interests of Starlink. To be sure, people who come to work for Starlink will gain considerable technological experience which they may well be able to put to use elsewhere. In general, I wouldn’t want to accept many demanding community obligations which would require me to spend a lot of time, attention and money which were not related to my company’s central purpose.

But most of all I wouldn’t be comfortable with the notion that because South Africa had an unhappy history with apartheid, this has somehow created an obligation for me to “redress” some of the harm that apartheid did. Starlink is an American company, and I don’t see why any American company ought to feel any moral obligation to help remedy what went wrong in South African history.

After all, Tesla and SpaceX (of which Starlink is part) operate in all manner of countries and many of them have had terrible things happen in the quite recent past. In India and Pakistan there was the terrible experience of Partition, costing countless lives and a number of wars since then. In Vietnam there were generations of war against the Japanese, the French and the Americans. Countless millions died. In China many tens of millions of lives were lost due to Mao’s “Great Leap Forward” and more millions during his Cultural Revolution, not to mention all the students’ lives lost in the Tiananmen Square massacre.

In Rwanda there was a terrible genocide costing some 800,000 lives. In Germany and Eastern Europe there was the War, the Holocaust and then the dreadful oppression of militarily-imposed Communist dictatorships. None of these countries believe that as a result of these domestic disasters foreign companies which come to invest there somehow owe them any special moral obligations, that they have to justify their presence by giving away 30% of their shares or undertake “equity equivalent” schemes costing much the same. And all of these historical experiences were much worse than apartheid.

The problem is that many South Africans can’t easily hear that anything was worse than apartheid. Partly this is sheer parochialism – in general South Africans don’t know much about the rest of the world and its history, and the apartheid experience is what they know about. But it is also because, encouraged by the ANC, so many South Africans have imbibed the notion that they were and are victims – and they really don’t want to hear anything that undermines that self-conception.

Yet a majority of South Africans were born after the end of apartheid, and the younger generation actually has only a very vague idea of what apartheid was all about. (A good test question is “How many of the ten black homelands can you name ?”) Similarly, one can often hear rhetoric about the past in which it is claimed that Africans were “enslaved” or “treated as slaves”, though anyone who knows about the historical reality of slavery knows what a major fact it was that Africans in South Africa were never slaves.

In all these countries which suffered more than South Africa, a company like Starlink sells its services simply as a willing seller to a willing buyer. A nice clean transaction without any complications, bells or whistles. After all, that’s what we all prefer, isn’t it ? Whether we want to buy a banana, a car or an air ticket we like to walk in, plonk down our money and walk out with the goods we want. But South Africa has strayed far in the opposite direction.

When one firm wants to merge with another or simply buy another business it is quite right that such details be vetted to check that they are not creating monopolies or harming competition. But our Monopolies Commission quite routinely tacks on all manner of conditions which have nothing whatsoever to do with their supposed central purpose of monopolies/competition. For the Commission is just one more expression of the government tendency of wanting to interfere everywhere it can in the market economy in order to do favours for politically connected interest groups. This leads to kickbacks of various kinds and is indeed a form of corruption.

Starlink has been successfully marketed all over Africa – tiny Lesotho has signed up for it, as has even bankrupt Zimbabwe. The benefits of having rapid broadband service throughout a country, including remote rural areas, and all at a bargain price, is immensely appealing. No other African country has asked Starlink to fulfill onerous BEE demands – not even West African nations which experienced the full horrors of slavery for generations. So if I were Elon Musk I would be looking hard at those deals and wondering why South Africa thinks itself so special that it can make demands that nobody else makes.