Business Day Law & Tax November

BUSINESS LAW & TAX

A REVIEW OF DEVELOPMENTS IN CORPORATE AND TAX LAW

Raids: what are you going to do when they come for you?

• No company or sector is insulated from compliance inspections, whether planned or random

Lauren Salt ENS

During September 2024, the department of employment & labour conducted more than 2,500 compliance raids in the hospitality sector

This spate of compliance audits was triggered by a TikTok video posted by a former waitress at Babel, a restaurant in Menlyn Park The waitress’ complaint centred around the requirement that she needed to purchase her own uniform and tools of the trade, including a bottle opener and cigar cutter Additionally, she stated that there was no basic salary in place, and she was required to pay the restaurant various

fees, including a portion of her tips and fixed amounts for the use of a runner and breakages

The department has announced plans to increase the number of inspectors from 2,000 to 20,000 to sustain these efforts While the initial focus was on the hospitality industry, the department has now moved on to the logistics sector Thus, no company or sector is insulated from these raids, and the

HOME AFFAIRS IS OFTEN INVOLVED IN THESE INSPECTIONS TO CHECK FOR COMPLIANCE WITH THE IMMIGRATION ACT

department aims to expand its focus across various industries

Compliance inspections can come about in one of a number of ways, not just as a result of viral TikTok videos They can arise as a result of a particular complaint to the department (generally in the prescribed manner), as a result of planned sector or company focuses (such as large corporates) or at random (where, for instance, the department drops inspectors at a specific office park) The inspectors are empowered to conduct these inspections with, or without, notice to the employer

When inspections arise out of a specific complaint, they are generally not limited to inspections relating to compliance with one piece of

CHECKS AND BALANCES

labour legislation Ordinarily, the department checks for compliance with all pieces of legislation which empower it to conduct these inspections

These include the Labour Relations Act, 1995 (LRA), the Basic Conditions of Employment Act, 1997 (BCEA), the Employment Equity Act, 1998 (EEA), the Compensation for Occupational Injuries and Diseases Act, 1993 (Coida), the Occupational Health and Safety Act, 1993 (OHSA) and the Employment Services Act, 2014 (ESA) The department of home affairs is also often involved in these inspections to check for compliance with the Immigration Act, 2002

While this seems like an overwhelming list, unless the

department is tipped off in relation to a specific issue, the inspections are fairly predictable with the information the department inspects being contained on a standard list, which they provide to their inspectors

Having said that, the inspectors often request the information on the spot As such, it is important that employers are prepared for these audits We make this caution against the background of our experience in these inspections, where the inspectors request information outside of the scope of the legislative requirements It is also important for employers to ascertain which of the sections of the relevant acts the inspectors are seek-

ing to determine compliance to and to understand what information would demonstrate such compliance Inspectors frequently rely on section 66 of the Basic Conditions of Employment Act to request any and all information regardless of its relevance to the assessment of compliance with any particular act In this regard, section 66(1)(a) provides that “in order to monitor or enforce compliance with an employment law, an inspector may require a person to disclose information, either orally or in writing, and either alone or in the presence of witnesses, on any matter to which an employment law relates, and

BUSINESS LAW & TAX

LATERAL THINKING

Crime busting a top priority for SA Inc

Evan Pickworth Business Law & Tax Editor

SA remains in a corruption emergency, placing the economy, individuals and businesses at heightened risk

As we look forward to 2025, it will be critical that crime busting tops the list of priorities in the “GNU” order

A major concern remains that certain sectors of the economy are not stepping up Transparency International’ s 2023 Corruption Perceptions Index (CPI) paints a bleak picture, showing SA below the global average with a score of 41 on a scale from 0 (highly corrupt) to 100 (very clean)

The recent arrests of businessmen involved in fraud syndicates and the ongoing tender fraud within government losing bidders now seem to be hiring hitmen to get the job done shows that the lessons of Steinhoff and the Zondo Commission have not been learnt Huge gold and tobacco smuggling networks seem to be looming in every dark alleyway

It is little surprise SA was placed on the dreaded greylist and will begin the new year still on the list, albeit with some progress having been made in drafting better laws to police corruption

• In 2025, we need to strive to exit the greylist and win the war against corruption HUGE GOLD AND TOBACCO SMUGGLING NETWORKS SEEM TO BE LOOMING IN EVERY DARK ALLEYWAY

Catching and prosecuting the crooks will be another story

The General Laws (AntiMoney Laundering and Combating Terrorism Financing) Amendment Act, kicked off in 2023 to address the slide The act introduced a sweeping range of integrated reforms to five pieces of legislation which regulated vastly different areas of concern trusts; nonprofit organisations; companies; and matters concerning the Financial Intelligence Centre Amended legislation included the Trust Property Control Act; the Non-profit Organisations Act; the Financial Intelligence Centre Act; the Companies Act; and the Financial Sector Regulation Act

As the country’ s financial intelligence unit, the Financial Intelligence Centre (FIC) is integral in the fightback It

applies measures designed to identify the proceeds of crime, combat money laundering, terrorist financing and financing of the proliferation of weapons of mass destruction

However, it has recently complained of a certain level of “willful noncompliance” by legal practitioners, estate agents, trust service providers, company service providers and casinos, where the average return rates of the required risk and compliance information is only about 63% This is despite these business sectors being the most vulnerable

This remains a major stumbling block to SA making any meaningful headway toward exiting the greylist and winning the war against corruption

The administrative sanctions that the FIC may impose in terms of section 45C (3) of the Financial Intelligence Centre Act, 2001 for noncompliance with the FIC Act is any one or more of the following sanctions:

(a) A caution not to repeat the conduct which led to the noncompliance;

(b) A reprimand;

(c) A directive to take remedial action or to make specific arrangements;

(d) The restriction or suspension of certain specified business activities; or

(e) A financial penalty not exceeding R10m in respect of natural persons and R50m in respect of any legal person

Section 61A of the FIC Act includes a failure to register as an offence subject to a fine not exceeding R10m or imprisonment for a period of up to five years

Accountable institutions

are already facing higher penalties for noncompliance Regulators such as the Prudential Authority, a division of the central bank, recently fined Sasfin R210m for historic noncompliance Financial service providers have also fallen into the crosshairs of the Financial Services Conduct Authority for failing to comply with provisions of the FIC Act The FSCA imposed a large fine on accountable institution JPFF in 2022 of R870,000 At the end of 2023, on appeal, R470,000 of this amount was suspended for three years if the company remained compliant Common transgressions tripping companies up include not spotting money laundering activities by syndicates and reporting on this in time In some cases, like Sasfin s, this has also opened up a large claim from the revenue authorities for alleged losses to the fiscus But in other cases, companies are not doing the following fairly straightforward things:

● Identifying the identities of all clients;

● Screening those clients against relevant targeted financial sanctions lists;

● Not doing enough to mitigate and manage risks that

products or services may involve or facilitate money laundering, terrorist financing or related activities;

● Failure to develop, document, maintain and implement a risk management and compliance programme (RMCP) for anti-money laundering and counterterrorist financing

COMPANIES, BIG AND SMALL, AND ESPECIALLY THOSE MOST VULNERABLE TO ATTACK, NEED TO IMPROVE THEIR COMPLIANCE STANDARDS

Accountable institutions are required to scrutinise client information to determine whether such clients are listed in terms of section 25 of Protection of Constitutional Democracy Against Terrorist and Related Activities Act and the Targeted Financial Sanctions Lists (TFSL) issued by the United Nations Security Council If an accountable institution finds that a client is on the TFSL it must, as soon as possible, report this to the FIC

Raids: what are you going to do when they come for you?

require that the disclosure be made under oath or affirmation This power is not allencompassing and the inspectors can only assess compliance with the acts that fall within the remit of the definition of employment law contained in the BCEA, which includes the Unem-

ployment Insurance Act, 2001, the Skills Development Act, 1998, the EEA, OHSA and Coida As a result, an employer being inspected may not be required (or permitted, in terms of data privacy laws) to share information which falls outside the scope of the legislative requirements Accordingly, during the

course of an inspection, employers should:

● Avoid providing information not requested from it; and

● Where there are requests which fall outside of the standard information requests, the employer may consider obtaining formal advice as to whether it can or should provide the additional informa-

tion requested, or any portion thereof, to the department

So, where an employer is subject to these inspections, it should, in all instances, seek to establish: (i) the section of the applicable legislation to which the requested information relates; and (ii) the relevant information the department is seeking to gather from the requested

documents or information

A finding of noncompliance can have serious ramifications for employers including, but not limited to, administrative penalties, fines (up to 10% of annual turnover where noncompliance relates to the Employment Equity Act) and/or imprisonment of responsible parties Accordingly, it is important

and take steps to freeze the client’ s assets

It is clear that companies, big and small, and especially those most vulnerable to attack, need to improve their compliance standards The risks of not doing this are severe, ranging from direct losses due to the direct fraud committed to the immense fines now being meted out Apart from this is the reputational risk that comes from weak compliance, as these transgressions are reported publicly and receive plenty of media interest Companies today are also being labelled for being the reasons why SA will not get off the greylist So in conclusion, it is time for businesses to step up their compliance standards in 2025 While it may be seen as an added burden, especially for smaller businesses, the risks of noncompliance are too high The fines mentioned above can wipe out many businesses It is far better to get the support needed to ensure compliance becomes a benefit and not a burden As a new year dawns let s make fighting crime our number one priority We just have to hope the GNU can take a minute to break away from its constant infighting to listen

that employers ensure they comply with the provisions of the relevant acts and maintain full and proper records of their compliance

The above also shows why compliance gap analyses and preparing employers for and supporting them through compliance inspections of this nature are becoming so important

/123RF SINENKIY

Organs of state told they need to pay up

• Innocent service provider compensated after ‘invalid’ contract extension leads to nonpayment

Pippa Reyburn, Yana van Leeve, Vivienne Jonker, Alexandra Maree & Lwandile Msimanga ENS

South African courts are inundated with disputes concerning commercial arrangements between organs of state and their service providers

The scenario in a recently handed down Constitutional Court judgment, Greater Tzaneen Municipality v Bravospan 252 CC [2024] ZACC 20 (Greater Tzaneen), is unfortunately ubiquitous The judgment bears lessons for both organs of state and their service providers

The Greater Tzaneen Municipality contracted with a service provider following a procurement process The contract was later extended; however, it was done so without adhering to the municipality’ s procurement policy and procedures

Notwithstanding, the service provider continued to perform Instead of paying for the

services, the municipality claimed it was not liable to pay because the extension was invalidly concluded

To shore up its escape from contractual liability, the municipality duly instituted judicial review proceedings and was granted an order setting aside the extended contract The service provider brought a counter claim for compensation, which it was granted, initially on the basis of unjustified enrich-

ORGANS OF STATE ARE NOT ENTITLED TO USE SELFREVIEW PROCEEDINGS TO ESCAPE THEIR CONTRACTUAL OBLIGATIONS

ment in the High Court, but then ultimately as a just and equitable remedy in the Supreme Court of Appeal (SCA) The municipality then unsuccessfully appealed to

the Constitutional Court

The importance of the Constitutional Court’ s judgment is, first, that organs of state are not entitled to use self-review proceedings to escape their contractual obligations to service providers

Second, the court accepted the innocent service provider’ s right to claim compensation Whether that claim for compensation is pleaded under the common law of unjustified enrichment or under the court’ s wide remedial powers in the Constitution was a matter of debate among the justices

Self-review does not immunise contractual obligations

The use of self-review applications by organs of state as a means to evade their contractual obligations has been widely criticised by South African courts In an unreported High Court judgment, Newlyn Investments (Pty) Ltd v Transnet SOC Ltd and Another (11446/21) [2022], it was held “the proliferation of late self-review by organs of

state is becoming a whimsical trait, fanciful and out of step with commercial and socioeconomic realities It camouflages inefficiencies by hiding under the protective shield of the Constitutionally mandated procurement procedures [t]his is an impermissible get out of contract free card to avoid its carefully struck bargain under the [agreed upon contracts]’’ (para 1)

Similarly, the SCA, in Transnet v Tipp-Con (Pty) Ltd and Others [2024] ZASCA 12, refused to grant an organ of state’ s self-review order, holding that it “did not initiate the review because it sought to vindicate clean and open governance, but rather to evade its contractual obligations” (para 55) In Greater Tzaneen, the Constitutional Court has now confirmed this position It refused leave to appeal based on the interests of justice and firmly held that doing so “will send a clear message to organs of state they must pay

for services provided to them by an innocent contractor

This is not a case where there is any pleaded allegation, still less evidence, of corruption or other wrongdoing on the part of [the service provider] that would justify the municipality’ s refusal to pay it

Instead, the municipality is opportunistically raising its own irregular conduct to avoid paying [the service provider] the municipality’ s unconscionable conduct in the present case is part of a broader phenomenon of organs of state seeking to rely on their own unlawful conduct to avoid compensating innocent contractors for services those contractors have provided to them This court

THE MUNICIPALITY’S UNCONSCIONABLE CONDUCT IN THE PRESENT CASE IS PART OF A BROADER PHENOMENON

must make clear that conduct of this sort will not be tolerated” (para 60)

Compensation as a just and equitable remedy

The case law prior to Greater Tzaneen indicated a service provider might have a claim for compensation based on unjustified enrichment, where a procurement contract under which it has performed is set aside for legal invalidity In Greater Tzaneen, the SCA determined South African law does not recognise a general claim for unjust enrichment (para 15) The court instead ordered the organ of state to compensate the service provider, as a just and equitable remedy based on section 172(1)(b) of the Constitution Given that this issue was not pleaded before the Constitutional Court, it could not make a determination on this issue and the SCA’ s reasoning therefore stands (Greater Tzaneen para 62)

Private equity and the shifting global order

Lisa Ivers & Tim Figures Boston Consulting Group

In the evolving landscape of global trade and geopolitics, private equity (PE) firms are navigating through a new normal characterised by heightened uncertainties, shifting power dynamics and an evolving geopolitical landscape, where the traditional norms of trade and investment are being reshaped

As part of this new reality, emerging markets are becoming more important, particularly for countries in the Brics group (Brazil, Russia, India, China and SA)

This has introduced opportunities but also new risks when undertaking investments or managing a global investment portfolio

This means private equity investors need to keep abreast of issues such as

trade wars, sanctions and regulatory changes that could impact the flow of capital and the stability of their investments

Through analysis, we identified several ways in which geopolitical events are affecting the investment landscape:

● Portfolio risk exposure among the 20 largest private equity fund portfolios, an average of 20% of assets are exposed to geopolitical and trade risk Some funds have even higher exposure

● Due diligence individual investment decisions are increasingly subject to geopolitical as well as economic considerations

● Areas of risk companies face risk exposure in three main areas: cross-border value chains, strategic sectors and climate regulation and policies Consequently, PE firms should adapt by

integrating geopolitical risk analysis into their due diligence processes and portfolio investment strategies This involves a thorough analysis of risk exposure, taking into account specific issues of the geographies, trade flows and sectors concerned

Brics nations have been pivotal in giving the Global South a greater voice in world affairs and challenging the domination of existing institutions With the potential expansion of the Brics+ to include emerging economies such as Egypt, Ethiopia, Iran,

PE

Saudi Arabia and the UAE, the bloc s influence on global trade and investment strategies is set to increase

While it is too early to tell how this group might develop, this expansion has the potential to establish parallel global institutions to Western-led ones and to create new opportunities for economic cooperation

Moreover, the expansion of the Brics group is part of a wider shift towards a multipolar world, where emerging markets gain a stronger voice and the ability to shape international policies and institutions This shift necessitates a strategic response from PE firms to capture the opportunities and mitigate the risks associated with a more fragmented and volatile global landscape

With a changing world order PE firms must be agile and innovative They need to

build strong local networks, invest in on-the-ground expertise and foster relationships with local partners Additionally, they must embrace environmental, social and governance (ESG) criteria, which are becoming increasingly important to investors and can provide a competitive edge in these markets

There are three key actions that PE firms can take to mitigate geopolitical risks:

● Review overall fund strategy PE firms should assess their portfolio for geopolitical and trade risk exposure They need to identify companies that require attention, screen for at-risk industries and evaluate potential changes in geopolitics, trade and regulations

● Create new portfolio value while assessing high-risk companies, PE firms should estimate the impact by analysing revenue, cost

drivers, value chains and sector exposure This helps identify value creation levers

● Incorporate geopolitical perspective in due diligence during due diligence for acquisitions, PE companies should actively apply geopolitical perspectives to assess target attractiveness and market outlook

While the new normal in geopolitics poses challenges for private equity firms, it also opens new avenues for growth By understanding and adapting to the political risks and embracing the opportunities presented by emerging markets including the expanded Brics+ group PE firms can position themselves to thrive in this changing landscape

It is a delicate balance of risk and reward, requiring a strategic approach that is both globally informed and locally attuned

BUSINESS LAW & TAX

Nuances of data as an asset

• Companies that effectively leverage data can gain a competitive edge but they must adhere to privacy laws

Wilmari Strachan ENS

In today’ s digital economy, data has emerged as a cornerstone asset for businesses, fundamentally shaping how organisations operate and innovate

This article delves into the multifaceted nature of data as an asset, exploring its immense value, the potential for monetisation and the critical legal considerations that come into play, particularly in light of evolving data privacy legislation Companies such as Google and Meta exemplify how data drives revenue through targeted advertising and personalised services, underscoring its role as a vital resource However, as the demand for data monetisation grows, so too does the need for compliance with laws designed to protect personal information

We will examine the nuances of data as an asset,

the ethical and legal frameworks governing its sale, and best practices for navigating the complex landscape of data privacy in this article

IS DATA CONSIDERED AN ASSET?

Data is undoubtedly one of the most valuable assets a company can have In fact, companies such as Google and Meta exist because of their data assets The value of their data lies in their ability to generate revenue through targeted advertising, which is heavily fuelled by data-driven insights

Data’ s value comes from its ability to inform decisionmaking, enhance customer relationships and help busi-

nesses identify trends, customer preferences and market opportunities Analysing data can streamline processes, reduce costs and improve overall efficiency Companies that effectively leverage data can gain a competitive edge by optimising operations, personalising customer experiences and innovating products or services

CAN DATA BE SOLD AS AN ASSET?

companies may sell aggregated, anonymised data that does not identify individuals, selling personal data involves significant legal and ethical considerations

CONSIDERATIONS UNDER POPIA

Popia aims to protect personal information processed by public and private bodies

Here are some key considerations for companies to consider when looking to sell data:

There are two important things to know about information

First, information, like matter, is never destroyed; it takes on different forms

Second, very little information is entirely private any more though it might be notionally privately owned or controlled

As the line between economic risks and insurable risks widens, questions regarding the obligation to share important data are being more frequently asked The question is in what circumstances there may be an obligation to share datasets in the public interest

The large global technology companies own, or at least possess, vast amounts of global information Financial institutions such as banks, insurers and financial services firms rely on their

PAT R I C K B R AC H E R

own information as well as access to big tech data to make client-related decisions Managing and sharing data can be a key to foreseeing and mitigating risks

The effect of climate change on the frequency and severity of major loss events such as hurricanes and flooding have highlighted the need for managing and sharing data Data protection laws play little role in this regard The emphasis of these laws on extracting large penalties from entities who have stored private information which is hacked

Data can be monetised in various ways, such as selling insights, targeted advertising or enhancing products and services However, the sale of data, especially personal data, requires compliance with data privacy laws While

specific to the intended use, including any potential sale

Privacy notices sometimes contain a provision informing data subjects that the company may transfer personal information in the event of a sale of business/assets It may even specifically state that the company may sell data assets Whether this type of notice (hidden in Ts&Cs) constitutes explicit and informed consent is questionable The question is therefore whether the company can rely on any of the other grounds for processing, such as legitimate interest

● Purpose limitation Personal data must be collected for a specific, explicitly defined purpose and may not be processed for a purpose that is not compatible with the purpose for which it was collected In the circumstances, explicit consent would be required for further processing (unless the data subject was informed, at the time of collection, that his/her data is to be sold) Legitimate interest cannot be used as a ground for further processing

To reduce privacy risks,

COMPANIES MUST IMPLEMENT APPROPRIATE SECURITY MEASURES TO PROTECT PERSONAL DATA FROM UNAUTHORISED ACCESS FIT

● Consent Companies must generally obtain explicit consent from individuals before processing their personal data (unless other grounds for processing exist) This consent must be informed and

CONSUMER BILLS

companies should consider anonymising or aggregating data before any sale This helps to ensure that individuals cannot be re-identified from the data set

● Security measures Companies must implement appropriate security measures to protect personal data from unauthorised access or breaches If data is sold to third parties, companies should ensure that contracts include clauses requiring those parties to comply with Popia and to handle personal data appropriately ● Transparency and accountability Companies must be transparent about their data practices This includes providing clear information to individuals about how their data will be used, stored and potentially sold

● Data subject rights Under Popia, individuals have several rights, including the right to access their personal information, the right to correction and the right to object to processing Companies must have processes in place to address and manage these rights

While data can be a valuable asset that can be monetised, companies must navigate the complexities of data privacy laws Robust data governance frameworks must be established and appropriate legal advice sought when considering the monetisation of data to ensure adherence to privacy laws and ethical standards

Who has an exclusive right to information?

deters sharing The possibility of major penalties resulting from sharing information between competitors and attracting the attention of competition authorities is a disincentive to any sharing For the possessors of information themselves, wanting a competitive edge is a compelling reason to protect the information they have

Take the example of financial institutions Banks and insurers who manage their information carefully can gather data from public sources and integrate it with their own risk and underwriting information The datasets they produce can tell a lot about risks that are insurable and risks that are not potentially insurable

The other side of the coin of data use is the mitigation of risks to the public If private data can be used for the public good, there are

reasons to ensure that there are well understood limits to the right to do so For instance, a well-managed dataset can tell which areas will be subject to major flooding in the event of a catastrophic storm If risk information results in properties in certain areas being vulnerable, the call for open banking and open insurance will become stronger The better outcome is to use shared information to warn people of the risks they face

The Financial Conduct Authority in the UK has been examining how the datasets

THE PROBLEM IS THAT THE BIGGER THE POOL OF ACCESSIBLE DATA THE MORE DIFFICULT CYBERSECURITY BECOMES

of big tech can be shared and used to provide better insurance products, wider choice and cheaper premiums The authorities are looking at the concept of sharing information in a single digital data locker , accessible broadly but without the right to keep the data

The problem is that the bigger the pool of accessible data the more difficult cybersecurity becomes, and leakages of consumer data become more likely

Consumers are unlikely to be happy about that prospect nor the prospect of unlawful or unfair financial discrimination when there is wide access to data that can lead to red-lining of the risks

As we are all embracing generative AI, the management of information becomes all-important

Gathering a huge quantity of data using the tools already

available can create a mess of information at high speed instead of a helpful solution

But yet more law regulating conduct and penalising what is seen as misconduct is not the answer What is needed is adapting current laws to enable constructive sharing to take place and allowing the entities involved to develop the right data strategy including sound data governance for the public good

The reaction to generative AI and cybersecurity by regulators worldwide has produced lengthy and highly complicated laws that make it more difficult rather than easier to cope with the challenges A more constructive approach would be helpful to everyone

● Patrick Bracher (@PBracher1) is a director at Norton Rose Fulbright

/123RF THVIDEO

BUSINESS LAW & TAX

New anti-graft clause frames new offence

• Members of private firms or SOES can be held liable for corrupt activities perpetuated by others

Jane Andropoulos, Ashleigh Graham, Alexandra Amaler & Lexi Liedtke Bowmans

The recently introduced section 34A of the Prevention and Combating of Corrupt Activities Act 12 of 2004 (Precca), which came into effect on April 3 2024, creates a new broadly framed offence where members of the private sector or incorporated state-owned entities (SOEs) can be held liable for corrupt activities perpetrated by others in certain circumstances

Section 34A(1) provides that any member of, for example, a company in the private sector or an incorporated SOE is guilty of an offence if a person associated with that member gives or agrees or offers to give any gratification prohibited in terms of chapter 2 of Precca (prohibited gratification) to another person, with the intention of obtaining or retaining either business or an advantage in the conduct of business for that private sector company or SOE Chapter 2 of Precca sets out various offences categorised as “corrupt activities”

However, section 34A(1) is qualified, so that no offence is committed where that company in the private sector or incorporated SOE had in place adequate procedures designed to prevent persons associated with that company or incorporated SOE from giving, agreeing or offering to give any prohibited gratification What constitutes ade-

Apple

Phuti

Mashalane & Dale Adams Werksmans

quate procedures” is not defined in Precca

It is widely accepted that section 34A is based on section 7 of the UK’ s Bribery Act 2010, which creates an offence where commercial organisations fail to prevent bribery

The UK Bribery Act is considered a key piece of legislation that has influenced anti-bribery and corruption (ABC) law globally Its “six principles” for “bribery prevention” will probably influence the interpretation of what “adequate procedures” means, in the SA courts

THE DOJ AND SEC APPLY A PRAGMATIC APPROACH WHEN CONSIDERING COMPLIANCE PROGRAMMES

However, another powerful and influential piece of ABC legislation is the US Foreign Corrupt Practices Act of 1977 (FCPA), which while broad in scope applies primarily to instances of bribery and corruption of foreign (state) officials, to obtain an advantage Importantly, subsidiaries of US-held companies are subject to the FCPA including those subsidiaries that are based in SA

The FCPA does not expressly make provision for an offence of failing to prevent bribery , as the entities responsible for enforcing the FCPA the US department of justice (DOJ) and the US Securities and Exchange

Commission (SEC) recognise that “ a company ’ s failure to prevent every single violation does not necessarily mean that a particular company ’ s compliance program was not generally effective [ ] and they do not hold companies to a standard of perfection”

Rather, when deciding whether to conduct a probe or bring charges and/or render fines or accept selfreporting of corrupt and unethical business practices, and therefore reduce the fines levied, in terms of the FCPA, the DOJ and SEC will consider, inter alia, the adequacy and effectiveness of a company ’ s internal organisational safeguards and compliance procedures and programme(s) at the time that the alleged violation of the FCPA is committed

There are examples of criminal probes that have resulted in substantial fines being imposed on US companies due to insufficient internal organisation to prevent bribery of foreign public officials leading to the payment of bribes abroad to secure contracts

The establishment and extent of internal organisational structures are factors considered when determining whether to reduce fines and the remedial steps that are required to be implemented by an offending company, including whether to appoint a monitor to oversee the introduction of these internal organisational safeguards (compliance programmes)

Other important consid-

erations may include, inter alia, the nature and seriousness of the offence, the pervasiveness of wrongdoing within the company, the company ’ s history of similar misconduct, and whether the company has self-reported, co-operated, and taken appropriate remedial action

It should be noted that the DOJ and SEC may choose not to pursue charges against a company for violating the FCPA where the company has an effective compliance programme and may even “reward a company for its programme, even when that programme did not prevent the particular underlying FCPA violation that gave rise to the investigation”

The DOJ and SEC apply a pragmatic, common-sense approach when considering compliance programmes, involving the following three broad questions:

● Is the compliance programme well designed?

● Is the compliance programme adequately resourced to function effectively?

● Does the compliance programme work in practice?

Compliance programmes that merely employ a “tick box” approach will likely be ineffective and companies should consider the specific needs, challenges, and risks associated with their businesses when creating a compliance programme

The DOJ and SEC have identified the following “hallmarks of effective compliance programmes However, those responsible for compliance should carefully consider what their specific

business would require from a compliance programme to effectively prevent, detect and remedy violations of the FPCA This would include:

● Commitment by senior management to a culture of compliance, which is reinforced and implemented at all levels of the business and is accompanied by a clearly articulated policy against corruption

● An effective code of conduct that is clear, concise and accessible to all employees and other parties associated with the company, as well as policies and procedures designed to mitigate risks associated with the business

● Oversight and implementation of the compliance programme by the senior executive(s) of the company who should be sufficiently autonomous from management and should have the necessary resources to effectively implement the programme in the organisation

● A comprehensive, riskbased compliance programme that is tailored to address the specific risks associated with the company ’ s business, is adequately resourced, and is implemented in good faith

● Steps taken to ensure relevant policies and procedures are effectively communicated

COMPLIANCE

PROGRAMMES THAT MERELY EMPLOY A ‘TICK BOX’ APPROACH WILL LIKELY BE INEFFECTIVE

throughout the company through periodic training, certification, and/or ongoing advice and guidance in respect of the compliance programme

● Clear and appropriate disciplinary procedures that are applied across the company on a prompt, reliable, fair and consistent basis Positive incentives may also facilitate greater compliance and the SEC has encouraged companies to reward “doing the right thing” ● Risk-based due diligence in respect of third parties associated with the company considering the third party’ s qualifications and associations and business rationale for the third party’ s inclusion in the transaction and ongoing monitoring of relationships with third parties

In conclusion, a company in the private sector that complies with section 34A of Precca, by adopting adequate procedures to prevent persons associated with that company from conducting corrupt activities, will probably find it uses the same kind of or similar compliance practices recognised by the FCPA, as the “adequate procedures” to stop corruption Of crucial importance is that SA subsidiaries of USheld corporations, or any corporation that falls within the FCPA definition of such, ensure that when their adequate procedures are implemented, they similarly consider and comply with the provisions of FCPA

The adoption of these procedures can only stand a corporation in good stead

’ s monopoly power is your iPhone ‘illegal’?

improve competitiveness

Vertical integration is a powerful strategy employed by businesses to control more than one stage of their supply chain By integrating operations upstream and or downstream, businesses can reduce costs and enhance efficiencies, as well as

However, vertical integration can sometimes be illegal This is according to a lawsuit instituted by the US Department of Justice (DOJ) on March 21 2024, along with 20 state and district attorneys-general (four of whom joined the lawsuit on June 11 2024) against Apple Inc, alleging, in a 91-page lawsuit, that Apple violated antitrust

laws with practices that were intended to keep customers reliant on their iPhones and less likely to switch to a competing device

Through the above alleged monopolisation, the lawsuit further alleges that Apple is able to exercise monopoly power to extract more money from, among others, consumers, content creators, artists, publishers, small busi-

nesses and merchants

The lawsuit also alleges Apple has monopoly power given its market shares of more than 70% of the performance smartphone market and more than 65% of the broader smartphone market and that the anticompetitive course of conduct of Apple has taken several forms, many of which allegedly continue to evolve today

In the broader context, this lawsuit reflects growing global concerns about the power wielded by major tech companies and the need for regulatory frameworks that ensure fair competition and consumer protection Given Apple s size and global presence, it is not inconceivable that other competition watchdogs across the globe will keep a close eye on the

developments of this lawsuit

This may particularly be the case in light of the fact that the case comes up at a time when many competition watchdogs around the world are trying to up their ante in the effort to effectively regulate digital markets

It remains to be seen whether Apple will be found guilty of violating antitrust laws We await the outcome

BUSINESS LAW & TAX

Passing of NHI Act irrational

• The healthcare legislation as it stands lacks clarity and guidance, and is contradictory

Prelisha Singh, Martin Versfeld & Alexandra Rees Webber Wentzel

Robust contestation on how to best fulfil the fundamental rights of South Africans complements and strengthens our constitutional democracy

Recent debate has centred on the effective realisation of the right to access healthcare, which the state is required progressively to realise for all South Africans, irrespective of their background and income

The right to access healthcare came into sharp focus on May 15 2024, when President Cyril Ramaphosa signed the National Health Insurance (NHI) Act into law, prompting the initiation of constitutional challenges by concerned stakeholders The most recent of these was filed on October 1 2024 in the North Gauteng High Court by the SA Private Practitioners Forum (SAPPF), represented by Webber Wentzel

According to the government, the NHI Act is intended to generate efficiency, affordability and quality for the benefit of SA’ s healthcare sector

An assessment of SA’ s current healthcare landscape shows a stark difference between private and public healthcare The country has a high-quality, effective private healthcare offering However, it is now inaccessible to the many South Africans who cannot afford private care or

medical aid payments Public healthcare, on the other hand, is understaffed, poorly managed and plagued by maladministration and limited facilities

The NHI Act has been positioned as the vehicle to address this disparity and a desire to take steps towards achieving universal healthcare in SA But a closer reading of the act highlights numerous problems with its content and implementation design The absence of clarity, detail or guidance contained in the act makes it impossible to assess how the act will be implemented (or, by extension, what the effects of this implementation will be)

This is particularly concerning given that years have passed since the economic assessments, on which the act was based, were undertaken Also problematic is the apparent lack of consideration given by the government to submissions made by

ACCORDING TO THE GOVERNMENT, THE NHI ACT IS INTENDED TO GENERATE EFFICIENCY, AFFORDABILITY AND QUALITY

affected stakeholders during multiple rounds of constitutionally required public participation

The SAPPF underscores these deficits in seeking both to have the president’ s decision to assent to the act reviewed and set aside, and the act itself declared unconstitutional

President Ramaphosa was obliged, in terms of sections 79 and 84(2)(a) to (c) of the constitution, not to assent to the act in its current form

Section 79 requires the president to refer back to parliament any bill that he or she believes may lack constitu-

BITTER PILL TO SWALLOW

tionality In this case, it is difficult to conceive how the president, or any reasonable person in the president’ s position, could not have had doubts about the constitutionality of the NHI Bill The decision by the president to sign unconstitutional legislation into law, instead of referring it back to parliament for correction, is also irrational

The president’ s duty properly to have referred the NHI Bill back to parliament is affirmed by the fact that the president is enjoined, by section 7(2) of the constitution, to respect, protect, promote and fulfil the rights contained in the Bill of Rights

INFRINGEMENTS

The SAPPF's application demonstrates that the NHI Act, in its current form, infringes on the rights to access healthcare services, to practice a trade and to own property Patients, including those using private healthcare, will be forced to use a public healthcare system that now fails to meet its key constituents’ needs Practitioners’ rights to freedom of trade and

profession will be infringed on, and the property rights of medical schemes, practitioners and financial providers will be unjustifiably limited

On its current text, the act could make SA the only open and democratic jurisdiction worldwide to impose a national health system that excludes by legislation private healthcare cover for those services offered by the state notwithstanding the level or quality of care

Concerns regarding the rights infringements in the NHI Act are worsened by its lack of clarity and the fact that crucial aspects of its implementation are relegated to regulations, with no clear guidance provided in the act itself

For example, section 49 provides that the NHI will be funded by money appropriated by parliament from the general tax revenue, payroll tax and surcharge to personal tax However, this stance does not reconcile with section 2, which provides that the NHI will be funded through mandatory prepayment , a compulsory pay-

ment for health services in accordance with income level Crucially, the extent of the benefits covered by the NHI’ s funding mechanism and its rate of reimbursement, which impact affordability and the provision of quality healthcare, remain unknown

The act is, at best, a skeleton framework, seemingly assented to in haste It is con-

COLLABORATIVE ENGAGEMENT SHOULD TAKE PLACE DURING THE LAWMAKING PROCESS, NOT AFTER ITS CONCLUSION

ceptually vague to the extent that the rights it seeks to promote will, in fact, be infringed if implemented

This renders the act irrational, in addition to its other constitutional defects

The NHI Act represents a radical shift of unprecedented magnitude in the SA health-

care landscape This should be and is required to be underpinned by meaningful public participation, up-todate socioeconomic impact assessments and affordability analyses and final provisions that provide a clear and workable framework for implementation

It is not sufficient for these vital issues to be addressed after the fact

Further engagements with stakeholders and the solicitation of proposals by the government cannot be used to splint broken laws Collaborative engagement, including the solicitation of inputs for meaningful consideration, should take place during the law-making process, not after its conclusion

A shift of the magnitude proposed by the act, absent compliance with the structures of the law-making process and adherence by the state to constitutional standards, including rights protections, would be detrimental to the entire healthcare sector public and private and not in the best interests of patients and practitioners

Notwithstanding the legal contestation surrounding the act, it and the laudable goals underlying it can also be a watershed The achievement of universal health coverage is an opportunity for the different stakeholders in SA’ s healthcare system to meaningfully collaborate and inform well-supported, factually informed, rational and genuinely progressive legislative steps by the state

Given the questions surrounding the act and the evident need it seeks to address, the space exists for healthcare stakeholders to align around shared goals and values They can leverage their available resources to design a healthcare system that serves all of SA s people fairly and equitably, using the significant existing resources invested in the country s healthcare sector

JSE proposes changes to listings requirements

Matthew Morrison, Madison Liebmann, Gosego Moroka, Daniel Torr & Sinovuyo Damane ENS

Following the president s assent to the Companies Amendment Act, No 16 of 2024 and the Companies Second Amendment Act, No 17 of 2024, the JSE published proposed amendments to the JSE listings requirements on September 18 2024 for com-

ment by close of business on October 21 2024

We note that while the proposed amendments have arisen from the Companies Amendment Act, the Companies Amendment Act is not yet in force and will take effect on a date to be proclaimed by the president, which remains unknown at this time

The proposed amendments relate to the following:

● Removing paragraph

3 84( j) of the listings requirements, which currently requires that the remuneration policy and implementation report be tabled annually for nonbinding advisory votes at the AGM;

● Maintaining the requirement for the remuneration policy and implementation report to be tabled annually for nonbinding advisory votes at the AGM for foreign primary issuers, with a proposed modification being that

the invitation for dissenting shareholders to engage with the issuer is proposed to only be dealt with if the remuneration policy or remuneration report is voted against by 50% of the votes exercised (currently 25%), to align with the Companies Amendment Act; ● Removing schedule 14 dealing with the requirements for share incentive schemes as the JSE is of the view remuneration, including incentives, will be adequately

dealt with through the Companies Amendment Act, in particular under the relevant remuneration disclosure provisions of the Companies Act (as it is to be amended when it comes into force), and the new requirements for shareholders approval of the remuneration policy and remuneration report in terms of the new Section 30A and 30B of the Companies Amendment Act; ● Introducing new provi-

sions dealing with dilutive share schemes as, going forward, the JSE intends to play a reduced role in dilutive share schemes, save for the approval of dilution to shareholders, basic minimum content of dilutive share schemes and general governance arrangements; and ● Certain consequential amendments flowing from the removal of Schedule 14 and paragraph 3 84( j) of the requirements

Being a ‘loan shark’ at work can result in dismissal

• Stokvels which operate as money-lending schemes can lead to disruptions in the workplace

Siphile Hlwatika ENS

Arecent study conducted by market research specialists Ipsos has revealed SA has a R50bn stokvel sector, made up of more than 800,000 stokvel groups and 11-million members

Ipsos has described this as a “vast network of dynamic ‘human banks’ in the South African economy ” Stokvels are, therefore, a well-established feature of South African society and play an important role as a social protection instrument

A stokvel is a voluntary association where members agree to regularly contribute a certain amount of money to a shared fund After a certain period of time, the accumulated monies in the fund are divided among the stokvel members Stokvels come in various forms, each serving a different purpose Typical examples include grocery stokvels, savings clubs, burial societies and so on

Stokvels ordinarily comprise individuals who have some type of relationship with each other For example, stokvels are typically kinship-based or neighbourhood-based Stokvels can also comprise members who are employed in the same workplace

It is common for stokvel members or third parties to borrow money from the stokvel and interest is typically charged on the provided loans This may potentially create problems within the employment context in circumstances where disputes may arise concerning the terms of the loan and/or the repayment thereof

For this reason, it is not unusual for an employer to prohibit the granting of loans in the workplace, whether on an individual basis or through a stokvel

However, the question arises: Can an employer dismiss an employee for participating in a money-lending

scheme when there are no specific workplace rules in this regard?

In Kaweng v South African National Biodiversity Institute and Other, the labour court recently had to determine the fairness of the dismissal of an employee who was found guilty of engaging in an unlawful money-lending scheme at the workplace

The employer, the South African National Biodiversity Institute (institute), received a whistleblower report alleging that a “loan shark” was operating at its premises In response, the institute appointed Mazars to investigate the matter Mazars’ forensic report found Mr Zola, an employee of the institute, had been loaning money to employees at exorbitant interest rates of 50% Following this, the institute

IT WAS UNDISPUTED THAT SOME EMPLOYEES WHO DID NOT HONOUR THEIR REPAYMENTS WERE THREATENED BY MEMBERS

levelled disciplinary charges against Zola, who was ultimately dismissed During the course of the disciplinary hearing, Zola implicated Mr Kaweng as being involved in the scheme as well

The institute, therefore, also charged Kaweng with the following allegation of misconduct: It is alleged that on or about the year 2017 you participated in the unlawful money-lending scheme within the SANBI s premises for own benefit during official working hours

Kaweng was found guilty and was dismissed He referred an unfair dismissal dispute to the Commission for Conciliation, Mediation and Arbitration (CCMA) During the arbitration proceedings, Kaweng s primary defence was that he had been involved in a stokvel, and not an unlawful money-lending

scheme However, under cross-examination, he conceded that some people had borrowed money from the stokvel

In the arbitration award, the CCMA commissioner noted that in instances where a stokvel is used as a moneylending scheme, interest is charged on the loan On this basis, the commissioner found that Kaweng’ s version that he participated in a stokvel and not a moneylending scheme was highly improbable and not plausible Kaweng also disputed the employer’ s version that his conduct was detrimental to its operations As a result, the commissioner analysed the legal implications of Kaweng’ s conduct The commissioner noted the following in the arbitration award:

● The department of trade & industry, on May 11 2016, published a notice determining that the threshold for registering as a credit provider with the National Credit Regulator (NCR) is nil (R0), for all applicable credit providers involved in lending money; and

● Only a loan which does not include interest, or a fee for late or deferred payment, will be exempt as it would not fall under the definition of a credit agreement in the National Credit Act, 2005 (NCA) and registration as a credit provider will not be required

Based on the above, the commissioner concluded that Kaweng was involved in an illegal money-lending scheme The commissioner further found that the employer was able to show the detrimental effect the illegal money-lending scheme had on its operations During the arbitration proceedings, it was undisputed that some employees who did not honour their repayments were threatened by certain members of the scheme

Although there was no evidence Kaweng had personally threatened the borrowers, the CCMA commissioner accepted that members of the illegal money-

COLLEAGUES

lending scheme had, either collectively or individually, intimidated the borrowers who did not honour their repayments, and that Kaweng was one of the founding members of the scheme On this basis, Kaweng was not successful in the arbitration proceedings Aggrieved by the CCMA outcome, Kaweng instituted review proceedings in the labour court

LABOUR COURT’S DECISION

During the review proceedings, Kaweng argued, inter alia, that section 8(2)(c) of the NCA provides that “ a transaction between a stokvel and a member of the stokvel in accordance with the rules of that stokvel” does not constitute a credit agreement, with the result that the NCA does not apply thereto As a result, Kaweng argued the stokvel was not operating illegally and that once he became aware money was being lent out and interest was being

STOKVELS ORDINARILY COMPRISE INDIVIDUALS WHO HAVE SOME TYPE OF RELATIONSHIP WITH EACH OTHER

charged, he resigned from the scheme

The labour court noted Kaweng had testified that, after the members started the stokvel, they were joined by a woman who changed the laws of the stokvel and things became very formal

The members of the stokvel started loaning money to, inter alia, employees and charged interest on the loans

He further testified that he knew a money-lending scheme had to be registered with the NCR In this regard,

Kaweng’ s evidence was as follows: “[w]e were not registered that is a reason that made me quit the stokvel, because [of] that money lending” ; and when he tried to quit “they said no, you are already [in] so you will only quit in December when we share the money ”

The labour court found that, based on Kaweng’ s evidence, the financial scheme changed from a stokvel into a formal money-lending scheme in terms of which employees (and others) were granted loans and charged interest The court also found that on Kaweng’ s own version, the change required registration, which was not undertaken Despite this, Kaweng continued to participate in the scheme and presumably shared in the profits of the scheme

On this basis, the Labour Court concluded that section 8(2)(c) of the NCA, which formed the basis of Kaweng’ s defence, found no application

Notwithstanding the above, the labour court found that even if the money-lending scheme was somehow not in breach of the NCA, the commissioner s decision to uphold Kaweng s dismissal would, nevertheless, have been reasonable This was because Kaweng had participated in the money-lending scheme at work with fellow employees apparently having been charged exorbitant interest rates and there was evidence of the scheme having caused disruptions in the workplace (even if this was caused by Kaweng s partner Zola)

While stokvels constitute an important part of the informal social security sector, they also carry the potential risk of becoming unlawful money-lending schemes in cases where the stokvel lends out money to members and/or third parties and

interest is charged thereon

Stokvels which operate as money-lending schemes can lead to disruptions in the workplace if disputes regarding the repayment of loans arise between members of the stokvel, or between these members and other third parties who have been provided loans by the stokvel In this regard, employees may potentially avoid the money lenders in the workplace when they have not been able to repay the loans

Another risk is that employees could potentially be making secret profits (through the interest charged) at the expense of the employer during working hours As a result, employees may devote more time and attention to running the moneylending business in the workplace, as opposed to devoting time to their employment duties

Employers may, therefore, be able to justify, in at least certain circumstances, the formulation of rules regulating the operation of stokvels in the workplace Employers may also put in place rules prohibiting the provision of loans altogether, whether based on an individual capacity or through stokvels In addition, employees should be made aware of the fact that stokvels, which lend money and charge interest thereon, may be in contravention of the NCA

● Reviewed by Peter le Roux, an Executive Consultant in ENS Employment Department

EMPLOYEES COULD POTENTIALLY BE MAKING SECRET PROFITS AT THE EXPENSE OF THE EMPLOYER DURING WORKING HOURS

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BUSINESS LAW & TAX

Competition law celebrates 25 years in SA

•

Competition Act of 1999 aimed to dismantle monopolistic structures, promote fair competition

Tamara Dini, Derek Lötter, Amanda Mfuphi, Claire Reidy, HB Senekal, Judd Lurie, Lital Avivi, Maryanne Angumuthoo & Richard Bryce Bowmans

Twenty-five years ago, the country’ s journey towards a robust competition regime began amid democratisation and economic reform

Apartheid-era economic policies had entrenched monopolies and restricted fair competition, stifling innovation and growth

Recognising the need for a more equitable market system, SA’ s new democratic government established the Competition Act in 1999, which aimed to dismantle monopolistic structures and promote fair competition

The first of the African competition regulators, the SA Competition Commission was established in 1999 and introduced competition advocacy, built capacity and expertise, engaged stakeholders and investigated and prosecuted anticompetitive conduct

The Competition Tribunal and the Competition Appeal Court have shaped the body of jurisprudence in SA’ s competition landscape The tribunal, established to adjudicate competition cases, has

delivered numerous landmark rulings that have defined the application of the act Its decisions have addressed an array of anticompetitive practices, from mergers and acquisitions to abuse of dominance, and have often set important precedents and clarified the

THE TRIBUNAL’S DECISIONS HAVE ADDRESSED AN ARRAY OF ANTICOMPETITIVE PRACTICES, FROM M&A TO ABUSE OF DOMINANCE

scope of prohibited practices

The court has refined competition law by reviewing the tribunal’ s decisions Its judgments provide critical interpretations of the act, contributing to the evolving understanding of competition law

Despite its track record, the competition law framework faces challenges The evolving global economy and rapid technological advancements require continual updates to the legislation and its application

Issues such as digital market dominance, cross-border competition concerns and

changing business practices demand proactive and responsive approaches to ensure the law remains relevant and effective

The commission, along with many other global competition regulators, is also grappling with the issue of where the boundary sits between competition enforcement and public interest Since the Competition Act amendments in 2019, a core focus has been on addressing a greater scope of public interest imperatives

CARTEL ENFORCEMENT

Busting the bread cartel in 2006 was a milestone for the commission as it attracted publicity and had an impact on low-income earners

The commission continued to generate buzz around cartels when it unearthed the construction cartel linked to the 2010 World Cup stadiums By introducing the fasttrack settlement process, firms were incentivised to make full and truthful disclosures of bid rigging in return for expedited processes and lower penalties

While the cartel provisions of the act refer to presumptively anticompetitive conduct, characterisation was introduced in the Anzac case This recognised that not all collaborations between

competitors are anti-competitive, and allowed for an assessment to clarify whether the conduct concerned was aimed at excluding competition

The commission’ s corporate leniency policy and use of dawn raids have been effective in exposing cartels

The penalties that may be imposed have acted as a deterrent, in particular, the introduction of criminal liability for directors and managers under the 2019 amendments, although there have not yet been any criminal prosecutions

When they were established, the competition authorities could not simply break up monopolies or split dominant firms It is not the position of dominance that is frowned upon, but whether that position of dominance is abused The authorities had to work within the ambit of competition legislation, and that remains the same today the commission is tasked with assessing the practices and conduct of dominant firms

A key case decided by the tribunal in 2005 involved incentive schemes used by South African Airways (SAA) in its arrangements with travel agents

SAA was a dominant

player in the domestic travel market and the tribunal ruled that, on a balance of probability, it was the practical effect of SAA’ s incentive scheme that induced travel agents to not deal with SAA’ s competitors On this basis, and having implemented this conduct over time, SAA had engaged in an abusive, exclusionary act

The tribunal noted it was necessary to show that the exclusionary act had an anticompetitive effect, and this could be demonstrated by direct evidence of an adverse effect on consumer welfare or by showing that the exclusionary act was significant in foreclosing the market to competitors Evidence of both was presented and the tribunal ultimately found that the commission was correct, SAA had abused a dominant position

That test for a finding of abuse of dominance has remained the same there must be a showing of significant anticompetitive effect attributable to abusive conduct In 2019, the amendments introduced a focus on helping small and medium enterprises (SMEs) and firms owned by historically disadvantaged persons Dominant firms must now consider how they deal with these

kinds of companies

There have close to 50 interim relief applications brought to the tribunal since 1999, the majority dismissed

One of the key aspects of section 49C of the act clarified by the tribunal is that the requirements for interim relief should be holistically considered In the case of eMedia investments and MultiChoice, the Competition Appeal Court clarified that interim relief extensions may be granted on more than one occasion, provided that each time the extension did not exceed six months

MARKET INQUIRIES

Amendments in 2019 expanded the commission’ s powers, making market inquiries a key tool for intervention There have been market inquiries in numerous sectors with more planned

The commission’ s recommendations following these inquiries have included requiring spend commitments and altering business models The commission has taken the view that it can make binding recommendations, particularly those aimed at supporting historically disadvantaged persons and SMEs

So far, five companies have challenged the commission’ s recommendations in the online intermediation platform inquiry, on issues of substance and process, but also on whether the commission has the power to make binding recommendations

The landscape of African competition law presents a different context to that which prevailed in 1999, with competition laws in effect on national, regional and soon, continental levels In this changing context, innovative solutions are required that give effect to the commission’ s imperatives, including effective participation by all, while remaining supportive of the competitiveness and functioning of businesses and the market

Be careful with what is recorded in an affidavit

Aslam Moosajee & Zameer Omar ENS

In the case of Mogale v BMW Finance Services (SA) (Pty) Ltd, the Limpopo Division of the High Court of SA, considered whether the irregular commissioning of an affidavit should be condoned

The applicant, Mr Mogale, raised a dispute over the answering affidavit deposed to by Mr Lubbe, a representative of the respondent, BMW Finance Services In the answering affidavit, Lubbe identified himself as male However, the commissioner of oaths certificate attached to

the affidavit suggested in one part that he was male, and in another, that he was female Mogale argued that the difference in gender meant the affidavit was not commissioned in the prescribed manner Mogale alleged that it created uncertainty about the identity of the deponent and prejudiced his case Mogale also suggested that this made it highly probable the prescribed oath was not administered by the commissioner of oaths in the presence of Lubbe Mogale also contended that the answering affidavit did not comply with the regulations made under the Jus-

tice of the Peace and Commissioner of Oaths Act 16 of 1963 and that the affidavit was delivered outside the required period without a condonation application

Regulation 3(1) states a deponent shall sign a declaration in the presence of a commissioner of oaths

Regulation 4(1) states that below the deponent s signature or mark, a commissioner shall certify the deponent acknowledged that he/she knows and understands the contents of the declaration

Regulations 3(1) and 4(1) obliges a commissioner of oaths to properly identify the gender of a deponent Should

the commissioner fail to, the court will be reluctant to assume that the affidavit is regular Accordingly, the proper identification of the gender of the deponent in the commissioner of oaths certificate is imperative

The court reiterated the principle that an affidavit is a written statement sworn to by a deponent in the presence of and before a commissioner of oaths Where a commissioner of oaths fails to indicate the gender of the deponent, the inference will be that the deponent did not appear in person before a commissioner of oaths

The court has a discretion

to accept/refuse an affidavit, depending on whether there is substantial compliance with the regulations The court found that there was a disjoint between Lubbe s declaration and the commissioner of oaths certificate

The court declined to condone noncompliance with the regulations and found that the answering affidavit was not properly commissioned and therefore irregular

Since the court found the answering affidavit was irregular, it was unnecessary to determine if the late filing of the answering affidavit should be condoned

BMW Finance Services

was provided with an indulgence to correct the error and file a re-attested supplemented affidavit

BMW Finance Services was ordered to pay the costs of Mogale s application over the irregularities pertaining to the answering affidavit

Even though the irregularity was not condoned, the application only had a dilatory effect as the court permitted BMW Finance Services to re-sign the affidavit before a commissioner of oaths and to correct the error These technical points therefore only serve to increase costs and did not result in a complete defence

BUSINESS LAW & TAX

Balancing labour, AI and ESG needs

•

Business leaders, HR professionals must familiarise themselves with what is coming down the tracks

Zaeem Soofie Dentons

AI, ESG, LRA, Popi and BCEA may be unwieldy acronyms to many, but the business world is fast waking up to their impact on reputations, bottom lines and the need for social justice

It is essential for business leaders and HR professionals to familiarise themselves with what is coming down the tracks, including recent changes to the Employment Equity Act (as amended) and designated groups, the Companies Act in respect of remuneration disclosures and approvals, and the AI Policy Framework published by the department of communications & digital technologies, as well as experiences in other markets

What’ s more is that if you see it as a tick box exercise, it will amount to nothing more than malicious compliance, defeating the objectives of sustainable progress and transformation

Among the significant changes will be how the law, HR and companies manage the “rise of the machine” (AI, or artificial intelligence) which has seen the globalisa-

tion of the labour market, job redistribution and a heightened need for risk detection and mitigation in systems and processes where large fines and reputational harm loom for those who get it wrong

Added to this is the continued need for social justice and salary equity in the workplace and a balanced approach to workplace policy and corporate financial and strategic planning

AMONG THE SIGNIFICANT CHANGES WILL BE HOW THE LAW, HR AND COMPANIES MANAGE THE ‘RISE OF THE MACHINE’

For instance, many people do a Google search on AI and realise they must contend with a “data mountain” The risks are high if wrong decisions are made on how this new technology is harnessed across an organisation

Moreover, drafting more specific AI regulations and transforming existing legislation is a pressing concern SA has no existing legislation or

regulatory framework to govern the use of AI Thus, SA is heavily dependent on the application of data protection legislation for the regulation of AI AI regulation in SA is presently enforced through the Protection of Personal Information Act (Popia), the Consumer Protection Act, the Electronic Communications Act and the Electronic Communications and Transactions Act, among others

The department of communications & digital development recently published the draft National AI Policy Framework for public input

While the framework lays out 12 strategic pillars and charts a progressive way forward into the AI economy, including recognising the critical need for transparency and the avoidance of data processing bias, it is only the start it is expected to be followed by a policy document and new or amended laws and regulations to support the steps regulators, enterprises and individuals should take to participate in the AI economy

With data, machine learning and AI reshaping the business world, it is important to get ahead of these changes and not be taken by surprise The mobile economy will open up many new

avenues for work that will need to be managed and legally protected

The drive for social justice, transparency and pay equity continues, and executives in particular need to be fully aware of them

The days of hundred-fold pay disparity between lowest and highest paid employees may well be drawing to a close given the marked shift globally and the ever present challenges locally in wage negotiations, restructuring and retrenchments over the years

In this regard, President Cyril Ramaphosa recently signed the Companies Amendment Act into law This law is directly linked to the Employment Equity Amendment Act, 2022, particularly section 27, which refers to the statement of income differentials required from designated employers Companies will need to disclose the average and median total remuneration of all employees, the remuneration gap between the total remuneration of the top 5% highest paid employees, and the total remuneration of the bottom 5% lowest paid employees

Other key changes on the labour front include the declaration invalid of the provisions of sections 25, 25A, 25B

and 25C of the Basic Conditions of Employment Act No 75 of 1997 (BCEA) and the corresponding provisions of the Unemployment Insurance Fund Act No 63 of 2001 (UIF Act), sections 24, 26A, 27 and 29A, because they are inconsistent with sections 9 and 10 of the Constitution

This means an employee who is a single parent is entitled, and employees who are a pair of parents, are collectively entitled to at least four months’ consecutive parental leave

In Van Wyk and Others v Minister of Employment and Labour, the seminal case leading to the above changes and in which Dentons represented one of the successful litigants, the court said the declaration of invalidity is suspended for two years from the date of this judgment to allow parliament to cure the defects

However, companies must act now in terms of the interim order to ensure their parental leave policies and related payments are in line with the changes, especially practical steps to manage “inter-parent” leave sharing

OUR COURTS HAVE THROWN OUT ATTEMPTS BY BUSINESSES TO AVOID THE CONSEQUENCES OF SECTION 197

Another area to watch closely is the treatment of staff during a merger Section 187(1)(g) of the Labour Relations Act holds that it is automatically unfair to dismiss an employee for a reason related to a business transfer covered by section 197

Our courts have thrown out attempts by businesses to avoid the consequences of section 197 They look at whether a business has been transferred as a going concern objectively Businesses will need to carefully review the wording of their merger agreements, undertake the necessary pre-emptive deal due diligence and be prepared to compromise on merger conditions aimed at protecting job security

In summary, it will be important to get ahead of the issues, balance the policy and business needs, adopt practical tools and processes borrowed from the school fees paid elsewhere and, above all, ensure buy-in As the saying goes, if you fail to plan, you should plan to fail

Section 77 needs to transform to remain relevant

John Botha & Grant Wilkinson Global Business Solutions

In the realm of SA s Labour Relations Act (LRA), Section 77 has long stood as a pillar of socioeconomic protest action This provision enables trade unions to elevate socioeconomic disputes to the National Economic Development and Labour Council (Nedlac) for resolution

The intention is to foster higher-level policy engagement among business, labour and government to tackle pressing issues that individual industries and companies cannot address alone Yet, in today s context, one must question the relevance and

efficacy of Section 77 COMPLEX PLATFORM FOR ADDRESSING DEEP-ROOTED SOCIOECONOMIC CHALLENGES

Historically, Section 77 provided a structured platform for addressing systemic socioeconomic challenges such as high unemployment, poor economic growth, retrenchments and the high cost of living, as well as inadequate government service delivery However, the complexity and entrenched nature of these issues often result in a lack of resolution The intricacies of the problems raised ranging from global economic factors to

local governance are rarely amenable to quick fixes or isolated solutions

The mechanics of Section 77 require that if the Nedlac committee fails to resolve a dispute, trade unions can issue a 14-day notice before embarking on protected stay-aways While employees participating in these protests are shielded from disciplinary actions, the prin-

THAT WORK ALONE SHALL TEST THE AVAILABILITY OF RELEVANT ADMINISTRATION AND PROFESSIONAL SKILLS

ciple of no work, no pay applies This raises an important concern: can such socioeconomic protests truly succeed in effecting change, or do they risk exacerbating an already fragile situation?

Further complicating matters, some unions initiate pro-test actions long after the original Nedlac dispute, sometimes months or even years later This delay diminishes the urgency and impact of the protests, often rendering them ineffective and out of sync with the current socioeconomic climate

So, what alternatives exist for resolving these deepseated issues? The crux lies in moving away from adversarial approaches and to-

wards collaborative, innovative solutions Macroeconomic and global factors, disruptive technologies and a volatile labour market will continue to shape the landscape The path forward necessitates stakeholder collaboration, the creation of trusting relationships and leadership defined by character and vision

Eradicating unemployment, inequality and poverty requires collective action and a unified purpose The resolution process must evolve to focus on co-designed solutions and mitigation strategies rather than mere confrontation Only then can we hope to address the underlying causes of socioeconomic grievances effectively

In its current form, Section 77 of the LRA risks becoming a tick-box exercise, insufficient for the complex challenges it aims to tackle To remain relevant, it must adapt, fostering a new culture of engagement and problemsolving that transcends traditional protest actions

Ultimately, the answer may lie in transforming Section 77 into a catalyst for meaningful dialogue and sustainable solutions rather than a procedural relic of a bygone era At the very least, there should be a date by which the s77 right to socioeconomic protest action expires, for example a 12-month period from the date that Nedlac has considered the matter

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BUSINESS LAW & TAX

Sars requires new medical scheme data

• For most SA taxpayers, the changes that took effect in October will impact those who pay PAYE

Jolanda Kleynhans PKF Octagon

From October 5, the SA Revenue Service (Sars) started making changes to the data that is required from medical aid schemes

For most SA taxpayers, the changes impact employees who pay PAYE, and the medical aids they are members of will be required to update their reporting methods

Remember, if you contribute to a registered medical aid scheme in SA, you ’ re eligible for tax relief in the form of tax credits, which are deducted from your annual personal tax liability Credits are nonrefundable and fall into two categories: Medical schemes tax credit (MTC) and additional medical expenses tax credit (AMTC) For employees who belong to

a registered medical aid according to the Medical Schemes Act, the medical credits reduce an employee’ s monthly PAYE amount, which is now implemented on most payrolls This increases an employee’ s net take-home pay

The key medical aid data changes include:

● Provision of data on disabled principal members and their dependents;

● Data of persons making payments on behalf of principal members; and

● Separate nonallowable

THE AIM IS TO REDUCE THE BURDEN ON MEDICAL SCHEME ADMINISTRATORS AND ENSURE MORE ACCURATE REPORTING

from the allowable expenses, now reported as claims not paid or covered by medical schemes on the IT3(f) certificate

These changes are designed to streamline processes and address the prevalent issue of incomplete information By providing more comprehensive data, the aim is to reduce the burden on medical scheme administrators and ensure more accurate reporting

This will also greatly reduce the audit process In practice, preparing a tax return in which someone pays for a dependent’ s contributions is often a veritable nightmare

For instance, sometimes multiple persons could share the cost of the medical scheme fees of a family member who is a dependant in relation to them In this situation, each contributor would be entitled to a share of

the medical scheme fees tax credit they do not themselves have to be a member of a medical scheme but can contribute to the medical scheme of which the dependant is a member

The following additional practical issues also need to be considered:

● If a taxpayer pays for an immediate family member’ s medical aid from his or her own income; and

● The rules in terms of age that of the taxpayer or the dependent who, in terms of the rules of a medical scheme, is a member of such medical scheme keeping in mind a “member” means a person who has been enrolled or admitted as a member of a medical scheme Therefore, the medical scheme data will reflect the details of the immediate family member instead

Any taxpayer wishing to claim disability expenses

TAXING MATTERS

under section 6B of the act for a dependant will have to ensure they have a completed the ITR-DD form and any disability expenditure appears on the prescribed list of qualifying physical impairment or disability expenditure

WHERE TO WITH NHI?

With these new measures in place, it begs the question whether further changes to medical credits can be expected under the National Health Insurance (NHI) proposals

Many commentators and experts have rightly held that the legislative framework is largely unimplementable, which is why the public is advised that little will change over the medium term

The NHI proposals are premised on the government being able to raise an additional R300bn in tax revenue, which, even if phased, is impossible The money is

needed as the proposals seek expressly to deny income earners the right to cover their own healthcare, regardless of the ability of the state to ensure adequate access to it

Reasons for wanting to implement NHI were stated as follows:

● “Medical tax credits only benefit those that are in a position to pay either through medical scheme coverage or out-of-pocket but do not benefit the poor ”

● “The money that goes into tax credits will be consolidated to benefit all as the role of medical schemes and out-ofpocket payment reduces under NHI ”

However, given the complexities and ramifications of the NHI scheme, it raises the question of whether this is the optimal approach to fund the NHI programme from an already burdened individual tax base

Hurdles when transferring immovable property

Estian Haupt & Leonard Willemse AJM

Adverse tax consequences arise when a person disposes of immovable property for proceeds exceeding the base cost

However, section 42 of the Income Tax Act No 58 of 1962 provides relief where the consideration for such disposal is the issue of equity shares by a resident company, and certain other requirements are met

Pursuant to section 42 of the act, no adverse tax consequences will arise as a result of the disposal because the immovable property is deemed to be disposed of at its base cost Section 42 of the act provides for the rollover of the tax history of the asset onto the acquiring company and that company s shares for future tax purposes

One of the requirements to qualify as a section 42

asset-for-share transaction is that the person (ie the transferor) must hold a “qualifying interest” in the acquiring company (ie the transferee) at the close of the day on which the asset is disposed of Where the disposal takes place to an unlisted company, a qualifying interest means at least 10% of the equity shares that confers at least 10% of the voting rights in that company In other words, on the date of the disposal, the transferor must hold at least 10% of the equity shares of the transferee It is, therefore, important to determine the date of disposal of the asset In terms of section 41 of the act, disposal is defined with reference to the definition of disposal in paragraph 1 of the eighth schedule to the act It follows that the time of such disposal (ie the date of the disposal) will also be regulated by the eighth schedule and, in particular, by paragraph 13

When dealing with immovable property, the sale agreement will generally be subject to certain suspensive conditions In terms of paragraph 13 of the eighth schedule, the time of disposal in these instances will be when the suspensive conditions in such an agreement are satisfied Practically this date will be well in advance of the transfer date in the Deeds Office

With reference to the qualifying interest requirement of section 42, the transferor must acquire at least 10% of the equity shares of the transferee company on the date that the suspensive conditions are satisfied, notwithstanding

that the transfer of ownership will only take place much later Stated differently, the transferee company must pay consideration (through the issue of shares) before it takes ownership of the asset

This does not have a significant impact on 100%held transferee companies; however, when third parties are involved, such practicalities should be considered when negotiating a transaction

WHERE TO FROM HERE?

Although there are potential arguments relating to when a person can be said to hold equity shares (in broad terms, such arguments consider whether a person can hold shares without being the shareholder in terms of the Companies Act), such arguments are complex and involved

As noncompliance with the requirements will result in the inapplicability of the section 42 rollover (giving

rise to adverse tax consequences), the prudent approach is to ensure the transferee company issues the required shares to the transferor on the date on which the suspensive conditions are fulfilled

Commercially, it would still be important to provide the necessary safeguards to the transferee company as provided consideration for an asset it is still to receive

Although section 42 asset-for-share transactions have become commonplace, the above illustrates the importance of consulting with your tax adviser before entering into any significant transaction The general provisions almost always have nuances that may not have been relevant to previous transactions but may result in adverse tax if implemented incorrectly

TAKEAWAY FOR TAXPAYERS

Although the withdrawal of Practice Note 31 coincides with the introduction of section 11G of the act, it is important for taxpayers to reconsider any deductions claimed with respect to interest expenditure

It is crucial to ensure compliance with tax legislation on an annual basis and to not merely repeat prior year treatment This is particularly true where previous positions (or a Practice Note in this instance) are changed and replaced with new provisions (ie section 11G)

We recommend that advice and assistance be sought from reputable tax advisers if you are uncertain of the new requirements for a deduction of interest incurred

● Estian Haupt is Associate Director: SA Direct Tax and Leonard Willemse Associate Director: SA Indirect Tax at specialist tax and transaction advisers AJM

BUSINESS LAW & TAX

Vital for executors to get ducks in a row

• Case of an applicant applying to the incorrect forum highlights this

Anthony Fineberg PKF Octagon

The administration of deceased estates is not for the faint-hearted

In some cases, it may become necessary for an executor or executrix of an estate to apply for a warrant via section 26(3) read with section 102 of the Administration of Estates Act 66 of 1965 for search and seizure of all assets registered in the name of the deceased as of the date of his or her death There could be numerous reasons for this, for instance if it is believed that property is being unreasonably withheld, or that unknown people are collecting income that is not being declared

The recent case of Ex Parte Ncamiso NO (16488/2024) [2024]

ZAWCHC 304 (October 10 2024) highlights the process and underscores a critical point it is important to follow the letter of the law when

trying to invoke this important, but complex, section of the act

TRANSPORT TUMULT

deceased’ s wife was also gunned down in the Nyanga location by unknown assailants The murders are still under police investigation

IT IS IMPORTANT TO FOLLOW THE LETTER OF THE LAW WHEN TRYING TO INVOKE THIS IMPORTANT, BUT COMPLEX, SECTION OF THE ACT

In this case, which includes a set of tragic facts, the applicant’ s father operated a taxi business during his lifetime and was affiliated with the Cape Amalgamated Taxi Association On November 29 2023 the deceased was shot by unidentified assailants in Gugulethu His assailants are still at large Subsequent thereto, the deceased’ s estate was reported to the office of the master of the high court On February 10 2024 the

As of the date of death, the deceased had about 18 taxis According to the applicant, the taxi business, on average, generated an approximate income of R40,000 per week collected by the deceased and his wife during their lifetime

The applicant asserts that unknown individuals are currently collecting this amount to the prejudice of the deceased estate The applicant further averred that the taxi business continues to operate, whereas the late estate defaulted on monthly instalments for some of the taxis in the amount of R250,776 25

The applicant expressed a reasonable suspicion that the deceased’ s vehicles remain in the possession or control of unknown individuals related to the deceased who

are conducting business for their selfish gain

The applicant brought this application on an ex parte basis and contended that should the possessors be alerted of this application prior to the hearing, there is a reasonable apprehension that they would hide away the vehicles and defeat the object of the seizure and search application

The applicant implored the court to issue an order for the authorisation of the warrant in terms of section 26(3) of the Administration of Estates Act directing the sheriff of this court to search and seize vehicles and place them in her possession from wherever and or whomever they may be found

The law seems to be perfectly in line with the need for a warrant Section 26(1) of the Administration of Estates Act enjoins an executor, immediately after letters of executorship have been granted to

him, to take into his custody or control all movable property, books and documents belonging to the deceased estate

In terms of section 26(2), if the executor, such as the applicant in the present matter, has reason to believe that any property, book or document is concealed or otherwise unlawfully withheld from him, he may apply to the magistrate having jurisdiction for a search warrant mentioned in section 26(3) Section 26(3) is, according to the court, particularly intended to strengthen the hand of an

SECTION 26(3) IS PARTICULARLY INTENDED TO STRENGTHEN THE HAND OF AN EXECUTOR IN CARRYING OUT HIS OBLIGATIONS

executor in carrying out his obligations to take charge of all the assets belonging to the deceased estate

WHY DID IT FAIL?

Which begs the question why did the application fail in this case? It all boils down the jurisdiction Section 26 specifically refers to the “magistrate” and not the “court” It is evident from the aforementioned that the applicant mistakenly submitted her application to an incorrect forum the high court The application ought to have been filed in the magistrate’ s court possessing the requisite jurisdiction

While it is hoped the criminals in this tragic case are found and punished and any shenanigans relating to the deceased’ s business rectified, the salutary lesson in this case is that executors must get their jurisdictional ducks in a row when seeking a warrant

/ REUTERS