BUSINESS LAW & TAX Spotlight falls on illicit activity

• Habib Overseas Bank was flagged for alleged exchange control contraventions

Evan Pickworth Business Law & Tax Editor

The recent decision by finance minster Enoch Godongwana, based on a recommendation by the central bank’ s Prudential Authority (PA), to place Habib Overseas Bank under curatorship, is a welcome case of the regulators flexing their legal muscle Habib, of course, was famously a buyout target of Gupta associates after many banks put the Guptas on ice

For the past four years, the PA has been reviewing it closely and has found many compliance holes

One area flagged relates to exchange control In this regard, and in line with the more aggressive regulatory stance, the recent case of Singh v South African Reserve Bank [2023] ZAGPPHC 112, is informative

In this case, the head office of Bidvest Bank made a report to the financial surveillance department of the Reserve Bank concerning alleged transactions suspected to be in contravention of the Exchange Control Regulations The head of the PA wrote to the bank regarding R80m moved to Mr Singh’ s Absa account and that it was extremely unlikely that a one-man attorney in Pietermaritzburg would have been able to make those profits from his attorney business

Blocking Order

The Reserve Bank is, of course, vested with the power to recover capital exported illegally and the law is on its side in terms of Regulation 22A the Bank can issue a blocking order relating to

Viewpoint Arica

tainted funds and in terms of Regulation 22C untainted funds can even be blocked

That may sound severe but when the extent of these transactions are measured, it is quite a clever provision to cover when amounts in excess of those already blocked need to be recovered

In the matter, Singh was unable to give a plausible explanation as to the source of the R80m transferred from his account held at the State Bank of India into several of his other accounts

The source is still being investigated by the Reserve Bank and should a further contravention be revealed it would be entitled to recover funds in excess of those already blocked

The law is getting sharper at helping investigate and track illicit activity With Africa becoming a veritable playground for launderers (the recent Al Jazeera documentary on the gold mafia refers) this can only be a good thing

Namibia aims to keep it local with green energy

Rewaldo Quest & Nicole Tjitendero ENSafrica

Namibia’ s emerging green energy industry has the potential to create thousands of jobs and contribute billions to the country’ s GDP

In November 2022, the Namibian government released the Namibia Green Hydrogen and Derivatives Strategy Report (GH2 report) which drew significant attention from locals, who are anticipating the development of legislation for Namibia’ s green hydrogen sector

The GH2 report captured ambitious local content aspirations, such as creating local employment of up to 80,000 additional jobs and creating local manufacturing industries that will produce the components required to produce and transport hydrogen and CO2, together contributing up to $6bn to GDP, 30% more than 2030

GDP estimates

Despite its expressed political willingness and expressed local content aspirations, if the current local content policies (LCPs) which comprise all legislative and regulatory instruments, policy tools, contracts and licensing arrangements imposed by the government that require firms to purchase and to use input goods and services available locally is not investigated, then the current LCPs will not yield the expected socioeconomic returns

Policymakers have a crucial role to play to ensure the echoed local content aspirations are achieved, particularly to localise linkages to create local value chains The current LCPs model utilised in other extractive sectors, such as mining and petroleum, does not create sufficient confidence that Namibians will benefit The LCPs model has yet to yield the expected socioeconomic development objectives as envisaged in the Strategic Plan 2017-2022 of the ministry of mines and energy

MINING

In the mining sector, section 50 of the Minerals (Prospecting and Mining) Act, 1992 contains certain general terms and conditions that form part of all mineral licences, which fall within the scope of LCPs: imposed by the minister on licences in terms of section 48 (4) of the Minerals (Prospecting and Mining) Act form the legal basis on which LCPs can be established and facilitated in light of localising linkages Put differently, the minister may use information gathered from mining licence applications to impose certain terms and conditions on licences that may lead to the establishment of local linkages

Petroleum

Namibians is broad and does not single out a particular community in close proximity to energy generation plants, which makes it difficult to assess the socioeconomic impact of local content efforts channelled towards them Policymakers must at the onset define what “local” is to determine who the beneficiaries of the LCPs are Once the beneficiaries of the LCPs are defined, certain LCP criteria must be considered previously disadvantaged Namibians must hold between 5% to 15% shareholding in mining companies More efforts to redress injustices are captured in the Namibia Investment Promotion Act, 2016 and the New Equitable Economic Empowerment Framework; however, the promulgation of the aforesaid has been halted consequence of linkages

● The employment of employees, give preference to Namibian citizens who possess appropriate qualifications, expertise and experience for purposes of the operations to be carried on in terms of such mineral licence;

● Carry out training programmes to encourage and promote development of Namibian citizens employed by such holders;

● With due regard to the need to ensure technical and economic efficiency, make use of products or equipment manufactured or produced, and services available, within Namibia; and

● Co-operate with other persons involved in the mining industry to enable such citizens to develop skills and technology to render services in the interest of that industry in Namibia

These conditions and any other condition that may be

Similarly, in the petroleum sector, section 14 of the Petroleum (Exploration and Production) Act, 1992 contains the very same general terms and conditions that can be imposed on licences, as found in the Minerals (Prospecting and Mining) Act, 1992, which can also be described as LCPs The minister may, in addition to the prescribed terms and conditions, impose these conditions and further ones on petroleum licences to initiate the facilitation of local linkages in the petroleum sector

Green Energy

There are no LCPs legislated for in the emerging green energy sector yet; however, if the LCPs model is used when formulating LCPs for the emerging green energy sector then policymakers must assess the success rate of the LCPs model in the mineral sector and the petroleum sector and make the necessary modifications to improve the LCPs model success rate

Considerations For Policymakers

The word or reference to local must be clearly defined The minerals act refers to Namibians as the beneficiaries of LCPs However, the reference to

The local content criteria must be established There are four types:

● Geographical location;

● Value addition;

● Ownership; and

● Redress of injustice

The geographical location criterion is concerned with the physical location of the business, in particular, the registration of businesses locally

The value addition criterion is satisfied if there is local value addition and the inputs to produce and services are not simply imported but such inputs are sourced locally

The ownership criterion is satisfied if the locals own a certain stake in extractive industry companies and derive certain capital benefits or profit shares

The redress of injustice criterion is satisfied when previously disadvantaged Namibians are made to benefit from extractive industry projects

The LCP criterion features in various local content initiatives For example, with regard to the ownership criterion, an initiative was taken to establish Epangelo Mining Company (Pty) Ltd to hold shares in mining companies on behalf of the state In relation to the redress injustices criterion, the ministry of mines and energy regularly imposes conditions on licences that

Research shows that Namibia relies heavily on local content, the ownership criterion as discussed above and the geographic location criterion The geographic location criterion is satisfied when businesses that supply foreign input capital goods and services are merely registered in Namibia

This also means registration of businesses in Namibia is sufficient to satisfy the LCP condition relating to the “ use of products or equipment manufactured or produced, services available within Namibia No further local content inquiry is made to screen the goods and services provided by businesses to ensure they are locally produced

An assessment of the percentage of inputs that are locally acquired by businesses or, if in the service industry, what percentage of the production is processed, must be done

Further assessment must be done to assess to what extent value is added locally and to what extent domestic value is added into inputs or outputs from other related sectors, as a direct

When it comes to the ownership criterion, the acquisition of shares in companies by the state does not necessarily yield dividends; specifically, if the company is still in the development stage and most funds are used for the development of the project The use of dividends is also not legislated for, in regard to channelling the same towards socioeconomic development objectives

The local content policies must be made more quantitative than qualitative

Most mandatory local content requirements imposed on licensed mining and petroleum companies are qualitative rather than quantitative, which is problematic because those local content requirements are vague and broad and compliance with the same is not strict Reporting on qualitative local content requirements is easier and less onerous

However, quantitative local content requirements have prescriptive binding targets in terms of volume or value: the number of local employees to be employed and the number of local suppliers to procure from Through the implementation of quantitative local content requirements, companies can easily be kept accountable compared to qualitative local content requirements

The Namibian government, through its policymakers, must carefully study each project and its commercial case and impose the quantitative conditions on licences or in agreements to ensure that socioeconomic development objectives are achieved

● Reviewed by Wolf Wohlers, an Executive at ENSafrica in Namibia