Sars reminded of its manners
• High court strengthens taxpayer rights, urges respect and fair treatment
Andries Myburgh & Emilé Cronje
ENS
In the landmark decision of ASPASA NPC and others v C: SARS (2024), the high court addresses a variety of procedural challenges raised by the Commissioner for the South African Revenue Service (Sars) but also provides essential clarifications on two key legal issues: the high court’ s directive under section 105 of the Tax Administration Act, 28 of 2011 (TAA) and the interpretation of the specified condition “bulk” in respect of aggregates in Schedule 2 of the Mineral and Petroleum Resources Mineral Royalty Act, 28 of 2008
These aspects have farreaching implications for taxpayers in general and the aggregates industry specifically
HIGH COURT REJECTS
SARS’ PROCEDURAL TACTICS
Sars employed a multifaceted procedural strategy (no less than six preliminary and procedural grounds of defence) to obstruct the applicants from approaching the high court on the merits of the
case, namely a statutory interpretation matter to ensure their compliance with the Mineral Royalty Act
Despite these tactics, Sars itself had requested a special allocation from the Deputy Judge President of the Gauteng High Court, emphasising the urgent need for clarity on the interpretation of “bulk” to address the industry-wide concerns under the Mineral Royalty Act The high court categorically refuted Sars’ procedural objections as deemed disingenuous, noting that its arguments focused on procedural barriers, despite its acknowledgement of the broader significance of resolving the legal standoff between it and the aggregates industry
JURISDICTION
One of those procedural barriers raised by Sars was section 105 of the TAA which generally restricts tax disputes to the tax court unless the high court directs otherwise The provision aims to streamline tax litigation and ensure that disputes primarily follow the administrative remedies established in the TAA However, the court identified appropriate or exceptional circumstances in
BUILDING BLOCKS
this case that warranted deviation from the default position These included:
● The purely legal nature of the issue;
● The widespread implications for the aggregates industry; and
● The inability of the tax court to issue an industrybinding declaratory order
The court highlighted the efficiency and certainty provided by a single high court decision rather than a series of tax court decisions, each binding the immediate parties By granting the section 105 directive, the court reinforced the role of the high court in addressing legal questions in “tax matters” of
significant public interest and industry-wide relevance
This sets an important precedent for taxpayers seeking declaratory relief from the high court to obtain clarity and certainty on statutory interpretation issues The court’ s decision comes amid a growing body of cases challenging the scope of section 105 of the TAA Taxpayers should not be dismayed by the recent string of Supreme Court of Appeal cases barring the high court from considering pure legal issues, as this judgment reaffirms the high court’ s vital role in addressing legal issues in tax matters Several pending judgments in the Constitutional Court are
poised to be seminal in shaping taxpayer rights and the boundaries of the high court’ s inherent jurisdiction in tax matters
Interpretation of the condition “bulk” and the purpose of the Mineral Royalty Act
The interpretation and the meaning of the condition of “bulk” in Schedule 2 of the Mineral Royalty Act as it relates to aggregates was the crux of the dispute Sars argued that “bulk” referred to aggregates at any stage, including post-beneficiation
In contrast, the applicants contended that “bulk” should be interpreted as the state of aggregates in their unprocessed form, at the “muck pile” (ie the unprocessed condition immediately after extraction)
The court adopted a purposive approach, analysing the text, context and purpose of the Mineral Royalty Act
The court noted that “bulk” in the context of the Mineral Royalty Act carries a technical meaning aligned with the industry’ s understanding,
THE INTERPRETATIONAL PRINCIPLES OUTLINED COULD INFLUENCE DISPUTES IN OTHER MINING ROYALTY MATTERS
rather than the meaning in common parlance In upholding the applicants’ interpretation, the court concluded the condition “bulk” in Schedule 2 means the shot rock (ie blasted rock) at the quarry face prior to any beneficiation Thus, aggregates at the muck pile are in the condition stipulated by Schedule 2 as it is commercially viable at the mine mouth, reinforcing that royalties must be levied at the condition of the first saleable point
The Mineral Royalty Act, as the court observed, serves two fundamental purposes promoting beneficiation rather than penalising it and ensuring fair compensation to the state for the extraction of mineral resources These dual objectives underscore the critical role of mineral royalties in balancing economic activity with national interests The court rejected Sars’ interpretation as it effectively nullified section 6(2)(b) of the Mineral Royalty Act, which accounts for changes in mineral condition postbeneficiation The Sars approach, the court reasoned, would discourage beneficiation, impose disproportionate royalties through the increased value through the process of beneficiation, and is inherently discriminatory as to determine a royalty based on an increased value
/123RF JUANENRIQUEDELBARRIOA
BUSINESS LAW & TAX
Are attorneys ready to trust gen AI?
• Breaching client confidentiality is one of the risks
Melissa Steele Nortons Inc
For the past few years, generative artificial intelligence (gen AI) has become the buzzword across most industries, including health care, financial services and, recently, legal Gen AI is a subcategory of AI that is capable of producing text, images, video and audio An example of gen AI is ChatGPT a gen AI chatbot where users can ask it questions and it will generate human-like responses
If you are a millennial or Gen-Z, you are likely to have embraced gen AI and view it as an essential tool for improving your efficiency and productivity Other generations remain sceptical of using gen AI tools due to their propensity to produce inaccurate results and potentially misuse personal data
While it may be difficult to persuade certain people to embrace gen AI, potentially the ultimate challenge is con-
vincing attorneys to do so First, the legal profession is generally slow to adopt new technologies and, second, the legal profession is the antithesis of gen AI tools in that it is characterised by trust and certainty, driven by precedent, and emphatic about maintaining confidentiality and legal privilege I understand why attorneys are apprehensive of using gen AI tools Although gen AI tools might reduce the amount of time spent on routine tasks such as legal research, the risk of clients’ confidential or legally privileged information being disclosed by using a gen AI tool outweighs any time-saving benefit Similarly, it seems nonsensical to use a tool for legal work that has issues with accuracy and bias, as well as being prone to “hallucinations” (a response generated by AI that contains false or misleading information, which is presented as fact) If, however, these issues are resolved, which “AI legal assistants” such as CoCounsel and Harvey AI claim to
have done, it is possible that the notion of an AI legal assistant will become more palatable to attorneys
EXISTING GEN AI TOOLS FOR LEGAL PROFESSION
One gen AI legal assistant that has gained traction and already been implemented at several global law firms, such DLA Piper, is Thomson Reuters’ aptly named gen AI assistant “CoCounsel” Reuters refers to CoCounsel as “the first and only professional-grade GenAI assistant” and “the only partner you can rely on, wherever you ’ re working” Some of CoCounsel’ s capabilities include reviewing up to 1,000 documents in minutes, interpreting and condensing critical information in any type of document and, my favourite, creating event timelines In addition, CoCounsel claims to be able to read, comprehend and write at a postgraduate level and complete the work of a junior associate in minutes With these capabilities it is not surprising that CoCoun-
LONG ARM OF THE LAW
sel is being used by attorneys to improve the services they offer to clients
If CoCounsel is as good as it claims to be, it seems to create an opportunity for law firms (who can afford to purchase such gen AI tools) to reduce the time and costs associated with tasks such as research, summaries and document reviews, and offer legal services to clients in a cost-effective manner It also potentially levels the playing field between small and large firms by allowing small firms access to time and cost-saving resources
Regardless of how effective an AI legal assistant might be, its appealability and longevity will be dependent on its accuracy and ability to keep clients’ confidential and legally privileged information secure at all times
ACCURACY OF AI TOOLS
Gen AI tools are reliant on the quality of their training data and any inaccuracies in data can severely impact their performance In other words, if a gen AI model is trained on biased or incorrect data, it will produce biased and inaccurate results This is why it is critical for gen AI models to have access to quality data
CoCounsel claims that attorneys can rely on it because it uses the right information, such as GPT-4 and its proprietary search technology, Parallel Search CoCounsel claims it does not “hallucinate” due to it “implementing controls to limit CoCounsel to answering from known, reliable data sources such as our comprehensive, up-to-date database of case law, statutes, regulations and codes”
However, CoCounsel caveats its claims of accuracy by stating that it was not designed to replace attorneys, and it remains necessary for attorneys to verify CoCounsel’ s output
The importance of having access to quality legal data to improve the performance of gen AI models is shown in Harvey AI’ s recent interest in the legal research company, vLex Harvey is a legal AI startup offering gen AI products to law firms which can analyse and interpret documents; summarise and draft legal documents, such as contracts; record billable hours; and answer research questions It is understood Harvey sought to acquire vLex to use its database of regulatory and legal docu-
ments, which would allow it to compete with one of its main competitors, CoCounsel
PRIVACY, SECURITY RISKS
Potentially the greatest risk with using gen AI tools is breaching client confidentiality or waiving legal privilege If an attorney uses a gen AI tool in their practice it will need to ensure the tool does not retain, store or collect clients’ confidential information or share this information with unauthorised third parties As mentioned, gen AI is trained on the information that is provided to it, which means there may be a risk of clients’ data being used to train the gen AI tool Certain gen AI tools provide assurances clients’ data will remain secure and not be used for training purposes For example, CoCounsel says it “ uses dedicated servers to access the underlying LLMs, meaning your data isn’t sent to ‘train’ the model as part of publicly accessible knowledge” Notwithstanding these assurances, attorneys should be mindful of the risks associated with using gen AI tools, including the potential for clients’ confidential information being disclosed or legal privilege being waived
Sars reminded of its manners in mining royalties case
CONTINUED FROM PAGE 1
would be to penalise aggregates in a manner in which mineral bearing ore is not penalised, and result in absurd outcomes detrimental to the aggregates industry and the broader economy
The court s analysis resonates beyond the aggregates industry, as the interpretational principles outlined could influence disputes in other mining royalty matters Mining taxpayers, even those outside the aggregates industry, should take heed of the court s emphasis on the purpose of the Mineral Royalty Act not to penalise but rather promote beneficiation and its implications for tax obligations in the mining sector
Strike-out application against Sars’ allegations and treatment of taxpayers
This is especially troubling given Sars role as an important and powerful organ of state , expected to uphold fairness and impartiality in its dealings with taxpayers
The court highlighted the applicants had approached the court not to undermine Sars, but to ensure compliance with the Mineral Royalty Act and clarify statutory ambiguities that directly impacted their mineral royal-
The high court s judgment also granted the applicants strike-out application against Sars where the judgment was particularly scathing, addressing Sars’ conduct in the litigation The court noted with regret that the statements made by Sars in its answering affidavit were intemperate, disproportionate and reflective of an inappropriate hostility toward taxpayers These included baseless accusations that the applicants were abusing court processes, involved in a stratagem, lacked bona fides and were engaged in conduct described as at best opportunistic and at worst trying to mislead the court
ty obligations The court reasoned that allowing Sars to use such an intemperate tone against taxpayers, who are compelled to maintain ongoing interactions with Sars by submitting to assessments, would unfairly tip the scales and necessitate intervention to level the playing fields
The court s disapproval was heightened by the fact that Sars had previously issued a nonbinding written opinion to the fourth to eleventh applicants, explicitly agreeing with their interpretation of the Mineral Royalty Act, as adopted by the applicants in this case Despite this,
SARS ADOPTED A HOSTILE AND CONTRADICTORY STANCE, OPPOSING THE APPLICANTS’ REASONABLE AND LAWFUL APPLICATION
Sars adopted a hostile and contradictory stance, opposing the applicants reasonable and lawful application Such conduct, the court emphasised, is not befitting of a public authority tasked with administering the tax law fairly and respectfully
In granting the strike-out application with costs on a punitive scale, the court sent a clear message that taxpayers are entitled to be treated with respect and professionalism, particularly in matters of pure statutory interpretation Sars regrettable approach in this case stands as a cautionary tale, reminding all state organs of their obligation to act with decorum and fairness in all interactions with taxpayers
Significance of declaratory orders beyond this case
The court emphasised that declaratory orders in the high court provide faster resolutions than the tax court and carry binding authority, pro-
moting legal certainty Rather than fostering litigation, declaratory orders in the high court avert a multitude of tax court litigation by clarifying legal interpretations, thereby reducing the volume of cases reaching the tax court
The court noted that it is more appropriate for the high court to adjudicate such cases, as its binding authority prevents inconsistent rulings and unnecessary tax court disputes, ultimately serving the interests of justice and ensuring efficient resolution of legal interpretational issues This approach benefits not only taxpayers but also Sars by streamlining the interpretation of contentious legal provisions In doing so, declaratory orders advance judicial efficiency while protecting the integrity of tax administration
CONCLUSION
The high court s decision in ASPASA NPC and others v C: SARS (2024) is a landmark judgment with profound implications for tax administration and statutory interpretation By addressing the procedural barriers raised by Sars, granting the section 105 directive, and providing a well-reasoned interpretation of bulk , the court not only clarified critical aspects of the Mineral Royalty Act but also reaffirmed the high court judiciary s role in ensuring fairness and legal certainty For taxpayers, this judgment is a reminder of the power of the high court to resolve complex legal disputes and the importance of holding administrative authorities to account Mining taxpayers, in particular, should note the broader interpretational principles established by this case, which could significantly impact their tax obligations in future disputes
● ENS represented ASPASA and the other applicants in this matter
/123RF PITINAN
First time for inconsistency as a defence
Enforcement of restraint of trade in the spotlight
Danie Pretorius Fluxmans Attorneys
The principle of consistency in the treatment of employees is one of the pillars of employment law However, a recent matter in the labour court, for the first time, dealt with inconsistency as a defence to the enforcing of a restraint of trade
In the matter of Altron Nexus (Pty) Ltd (Altron) v Fowler and Others, the labour court dealt with an urgent application for an interdict in terms of which Fowler would be interdicted from working for a competing entity to Altron, namely MST Critical Communications (MST) Fowler was employed by Altron as a sales representative and had concluded a restraint of trade undertaking with Altron It was common cause that Altron and MST were competitors
The labour court set out the test to determine reasonableness of enforcing the restraint agreement as follows:
● Is there an interest of the one party which is deserving of protection?
● Is such interest being prejudiced by the other party?
● If so, does the interest weigh up qualitatively and
quantitatively against the interest of the latter party not to be economically inactive or unproductive?
● Is there another facet of public policy that requires that the restraint should not be maintained?
The labour court concluded that where it is shown there is confidential information and/or trade connections to which the employee had access and which he could transmit to his new employer, the applicant would be entitled to the protection afforded by the restraint of trade agreement
The labour court also indicated the enquiry expected of
A PARTICULAR EMPLOYEE WHO IS SUBJECT TO A RESTRAINT MAY NOT BE SEEN AS A THREAT TO THE ORGANISATION
it is essentially a value judgment that encompasses a consideration of two policies, namely the duty by the parties to comply with the terms of their agreement, and the right to freely choose and practice one ’ s trade, occupa-
tion or profession
The labour court concluded the reasonableness and enforceability of a restraint depends on the nature of the activity sought to be restrained, the rationale for the restraint, the duration of the restraint, the area of the restraint and the parties’ respective bargaining positions
The court continued that the reasonableness of the restraint is determined with reference to circumstances at the time the restraint is sought to be enforced
On the facts the court concluded Fowler had knowledge and access to confidential information obtained during his employment with Altron and that he could exploit such confidential information to the benefit of MST and prejudice Altron
But for a defence put up by Fowler that Altron has not historically enforced restraint agreements, it is apparent from the judgment that Altron had made out a case for the relief it sought to have Fowler interdicted
Fowler raised a defence that Altron had not enforced restraint of trades historically Altron countered this with the contention its historical conduct in enforcing restraints was irrelevant
In the papers filed by
EACH TO THEIR OWN
Altron, it indicated the new MD of Altron revised its policy on the enforcement of restraints of trade and decided to actively enforce these provisions where appropriate, particularly in relation to the protection of confidential information and safeguarding of customer relations
It appears the labour court took issue with Altron for not advising its employees of the change of stance that occurred when a new MD was appointed
On the facts of the matter, Fowler was advised the company would enforce the provisions of the restraint concluded between Altron and Fowler when he tendered his resignation The court found that to inform him at that stage was too late It is difficult to understand why it was too late to inform Fowler that Altron would seek to enforce its rights flowing from his resignation, when he tendered such resignation
The court held that it was not unreasonable for Fowler to expect, based on Altron’ s previous conduct or practice as it existed at the time of his resignation, that Altron would not enforce the restraint of trade agreement
On the basis of the failure to inform Fowler during the discussions when it sought to
persuade him to stay that it would enforce the restraint, the court concluded it would be unreasonable to enforce the restraint agreement against Fowler
The court criticised Altron for being content with at least two former employees joining a competitor without any consequence The court held that Fowler expected the same or similar treatment and that that expectation was not unreasonable On that basis, the court held that enforcing the restraint of trade would be unreasonable As such, the urgent application for the enforcement of the restraint was dismissed
This is the first time inconsistency has been successfully raised as a defence to the enforcing of a restraint of trade Restraints of trade and the law applicable to it is based in contract law Principles of labour law such as inconsistency of treatment should not be a defence where the applicant for protection has complied with all of the requirements for the enforcement of a restraint of trade Sight must not be lost of the fact the labour court dealing with labour or employment matters is a court of equity where fairness is paramount Fairness has no part to play in courts of law
It is difficult to understand that it was not open to Altron to change its mind about the enforcements of restraints of trade particularly in relation to the protection of confidential information and the safeguarding of customer relations Does this mean Altron is now precluded from enforcing restraints of trade indefinitely? The confidential information and the positions held by employees in a large corporate entity differs markedly and, on this basis, also an inconsistency challenge would be inappropriate as one would not be comparing apples with apples
Moreover, a particular employee who is subject to a restraint may not be seen as a threat to the organisation or their access to confidential information was not as pronounced as that of Fowler If an employer decides not to enforce a restraint against such an employee, it could never be precluded from enforcing restraints against other employees In conclusion, it appears the defence put up on behalf of Altron, that an enquiry into consistency is legally irrelevant, accords with the legal position as applicable to restraints of trade before this judgment It is unclear whether Altron intends to lodge an appeal in this matter but, as things stand, this judgment of the labour court stands as a precedent until set aside by a court of higher authority
Since the labour court assumed jurisdiction of restraint of trade applications in relation to employees, it has become more convenient to approach the labour court for the enforcement of restraint of trade obligations, than to approach the high court It may well be that had this matter been heard in the high court, which is a court of law and not a court of equity, the outcome may have been different
SCA confirms important trust principle
Peter Blankenberg
Blankenberg & Associates Inc
In Glencore Operations South Africa (Pty) Ltd and others v Master of the High Court, Northwest and others [2024] ZASCA 179, a recent Supreme Court of Appeal (SCA) judgment, Mbatha JA (with all other judges concurring) upheld an appeal by the applicants
Briefly, the issue before the court revolved around the appointment of trustees to a trust formed for the benefit of the local community The trust was granted a percentage participation interest in a Glencore mine The trust deed set out precise provisions relevant to the appointment of the trustees It also
obliged the trust to be used exclusively and unconditionally as a special purpose vehicle to achieve the objects described in respect of its participation interest
Unfortunately, the political and other differences pursued by various members of the local community, in particular its leaders, led to the appointment of persons other than as defined in the trust deed Notwithstanding, on application to the Master of the High Court appointed in terms of the Trust Property Control Act 57 of 1988 (act), the master appointed as trustees those persons applying and disregarded the terms of the trust deed in so doing
The SCA held that, in terms of Section 6(1) of the
act, in the appointment of any trustee such appointment has to be in terms of a trust instrument, Section 7 or a court order
Further, in terms of the same section, and provided that one of the three requirements as described has been properly applied, thereafter such appointment must be authorised in writing by the master
Section 7 of the act deals with appointment of trustees by the master where the office of a trustee cannot be filled or becomes vacant, and was not applicable in this matter Regarding the third opportunity for appointment, no court order in respect of a trustee had been issued Accordingly, the decision
before the court was solely whether the appointments of the trustees were in terms of the trust deed
The court held that patently the trustees were not appointed in accordance with the trust deed, and that therefore their appointment was unlawful The court further held that the fact the master, on application by such unlawfully appointed trustees, had issued letters of authority in respect of such persons, did not cure the illegality of their appointment
The respondents, being the master and the unlawfully appointed trustees, further argued that, in terms of Section 13 of the act, the provisions of the trust deed should be amended by the court to
accommodate the appointment of the disputed trustees
Section 13 of the act deals with the power of a court, on application of a trustee or any person who, in the opinion of the court, has a sufficient interest in the trust property, to vary the terms and conditions of the trust which in the opinion of the court the founder of the trust did not contemplate or foresee, and which the court now deems just
The SCA held that this section may only be used by lawfully appointed trustees, which was not the case in this matter Further, the court held that no evidence was brought before it to establish the necessary interest in the trust property Accordingly,
Section 13 was inapplicable
Regarding Section 6(1), the SCA held there is no room for the exercise of a discretion by a court: unless a trustee is appointed in accordance with the provisions of the trust deed, or in terms of Section 7 or by way of a court order, no matter what the master may do, such appointment remains unlawful Finally, the SCA confirmed the principle that where a board of trustees is not properly constituted, the trust cannot be bound In its order allowing the appeal, the court inter alia ordered that costs of the appeal, including the cost of two counsel, be paid by the respondents (excepting the master) in their personal capacities
BUSINESS LAW & TAX
Turning screws on marketers
• Amendments a step forward in protecting
consumer privacy
Ashlin Perumall Baker McKenzie
Many South Africans have experienced the frustration of receiving countless spam calls or unsolicited e-mails and text messages urging them to buy products or take up credit offers
To address these unwanted marketing intrusions, the trade, industry & competition department has published proposed amendments to the regulations under the Consumer Protection Act, 2008 These proposed amendments aim to enhance consumer privacy and provide stronger protection against unsolicited direct marketing practices, with a particular focus on direct marketing by means of unsolicited electronic communications
A key feature of the proposed amendments is the establishment of an opt-out registry, managed by the National Consumer Commission (NCC) This registry will enable consumers to preemptively block unsolicited electronic communications from direct marketers Once the proposed amendments are finalised and in force, consumers will be able to register (in a prescribed form) a pre-emptive block in the opt-out registry against unwanted marketing messages via electronic communication It is the consumer ’ s
responsibility to keep their information in the registry up to date
Direct marketers, broadly defined in the proposed amendments as persons who engage in direct marketing, will be required to register in the opt-out registry before contacting any consumer for direct marketing via electronic communication This registration must be renewed annually and is subject to payment of a prescribed fee
Direct marketers will have to check their contact lists against the opt-out registry before sending any marketing messages and must refrain from contacting consumers who have registered a pre-emptive block for purposes of direct marketing via electronic communication
Additionally, direct marketers will be obligated to cleanse their databases monthly with the NCC to remove the information of persons who have registered a pre-emptive block in the opt-out registry
Enforcement mechanisms include allowing consumers who have registered a pre-emptive block to file a complaint with the NCC using the updated complaint form provided in the proposed amendments The NCC may issue compliance notices to offending direct marketers, outlining the required steps that must be taken and potential penalties if those steps are not taken Failure to comply can result
INFORMATION OVERLOAD
in substantial fines up to 10% of the direct marketer’ s annual turnover during the preceding financial year or R1m or prosecution that could lead to liability to a fine or imprisonment for up to 12 months, or both a fine and imprisonment
These proposed amendments will also need to be read with the Protection of Personal Information Act (Popia), particularly Section 69, which prohibits process-
THE OPT-OUT REGISTRY ALLOWS CONSUMERS TO PREEMPTIVELY BLOCK UNSOLICITED ELECTRONIC COMMUNICATIONS
ing of personal information for direct marketing via electronic communication unless there is consent or an existing customer relationship
Given the broad definition of a direct marketer in the proposed amendments, the responsible party and the operator will be deemed a direct marketer when engaging in direct marketing practices via electronic communication This means once the proposed amendments are finalised and are in force, they will also have to comply with the obligations imposed on direct marketers in terms of the proposed amendments, including registering in the opt-out registry as direct marketers before contacting any consumer for purposes of direct marketing via electronic communication
CONSUMER BILLS
It is also important to note that even if a person who is not a customer of the responsible party has not registered a pre-emptive block in the opt-out registry, the responsible party will still need to obtain consent (as required in Popia) for purposes of direct marketing to that person via electronic communications It will also seem that it will not suffice that the data subject is a customer of the responsible party and that all the requirements of Popia in this regard have been complied with
The responsible party will, in addition, have to check their customer contact list against the opt-out registry and refrain from sending marketing messages via electronic communication to customers who have regis-
tered a pre-emptive block In addition, the responsible party must remove from its database all data of persons (including customers) who have registered a pre-emptive block, by cleansing such data monthly with the NCC
These amendments represent a significant step forward in protecting consumer privacy in SA, a welcome development in the face of aggressive telemarketing strategies adopted by various businesses in this country By empowering consumers to control who can contact them electronically, the proposed amendments reinforce the protection of privacy principles outlined in Popia
In light of the proposed amendments, businesses engaging in direct marketing practices by way of electronic communications will need to review their practices in this regard and ensure compliance to avoid liability
Such measures will, accordingly, come at increased compliance costs and may be a severe threat to many businesses who engage in the practices these amendments aim to curb
While the proposed amendments may introduce additional compliance requirements for businesses, they ultimately foster a more respectful and responsible marketing environment in SA Companies that adapt promptly will not only comply with the law but also build greater trust with consumers
All stakeholders needed to submit their comments on the proposed amendments by the January 15 deadline
Changing people’ s mindset about generative AI
We will all have to change our mindset in relation to the use of generative AI when using or providing professional and advisory services
Generative AI clearly has more information, and the ability to analyse more information than we do It is rapidly becoming more intelligent in the dictionary sense of being endowed with the faculty of reason
Although we all use AI extensively in one form or another, questions arise when there is unsupervised and untested use of generative AI as the source of authority for conclusive advice, to formulate the advice, or to do the work itself
The question to be asked, and being more frequently
PAT R I C K B R AC H E R
asked by clients, is not “Did you use generative AI?” but “How did you use generative AI?” or even “Why didn’t you use generative AI?” There is no doubt that properly used, generative AI can examine documents and reach conclusions more efficiently or economically than people can in many situations; but the human element still remains essential
The problem is not the same as that experienced by teaching institutions such as
universities Popular generative AI tools are in many cases able to generate exam answers that cannot be detected, and on average attain higher grades than real student submissions That entails the learner imparting information in a cold clinical situation These learning institutions will have to develop ways of examining the knowledge of learners when unaided by generative AI to see whether they are using it in a way that preserves the learners basic ability to identify wrong but plausible-sounding answers, and to test that what they have written is fully comprehended by the learner The problems arise when imparting professional information that will be relied on by others
Most people believe that generative AI does not perform as well where both thought and feeling is required When acting for a client, the professional adviser must take into account the values and needs of the particular client and of the environment in which they operate There is clearly a difference between advice and perceptive advice Leaving aside the question whether generative AI will develop ethical approaches that align with our own values and needs, advisers have to maintain a monopoly on perceptive reasoning Previous weaknesses in the technology, such as hallucination effects, have been reduced considerably and are reducing all the time There is every reason, if not
necessity, to access generative AI in the course of business The criticism will be when professional advisers do not use generative AI which is available to improve performance
Generative AI is also a road to access to justice Ordinary people involved in disputes they cannot afford to fight will be able to get quick assistance in resolving their problems Legal help providers, such as lawyers on helpdesks who cannot
LEGAL HELP PROVIDERS WILL HAVE RESOURCES LIKE NEVER BEFORE TO GIVE ON-THESPOT ADVICE
hope to know everything about every problem brought to them, will have resources like never before to give useful on-the-spot advice, subject always to human review
Ultimately, professional advisers are tested against the nature of the advice, the outcomes it produces, and the cost of doing so No matter what resources they use, they bear responsibility for their role in the outcome
Declaring in advance whether and how generative AI is used in a material way to give advice will form an important part of the contractual and ethical responsibilities of the adviser
BUSINESS LAW & TAX
• Popia challenges organisations should not overlook in 2025
Nadine Mather & Talita Laubscher Bowmans
Based on the many questions organisations in SA are asking their legal advisers, it is clear there are still certain grey areas and misconceptions about the implementation the Protection of Personal Information Act (Popia)
The Information Regulator (IR) has conducted several own-initiative assessments of organisations’ compliance with the provisions of Popia These assessments do not take the form of “dawn raids” rather, organisations are given prior notice that an assessment will take place and these generally take place by way of in-person engagements between representatives of the IR and the organisation concerned
The IR generally does not hesitate to publicly announce where such engagements occur as it considers them a learning experience for others It publishes the enforcement notices it issues, if any, on its website with details of the organisation’ s name, the complaint, the IR’ s assessment and the alleged shortcomings to be corrected
Noncompliant organisations may face some embarrassment and reputational damage by being in the public spotlight Enforcement no-
tices must furthermore be attended to as a priority the IR affords organisations a limited time in which to ensure they are compliant
There are consequences for not complying with an enforcement notice It is an offence that, on conviction, carries a fine or up to 10 years ’ imprisonment or a fine and imprisonment Alternatively, the IR may impose an administrative fine of up to R10m (although, to date, has imposed administrative fines of R5m)
IR chairperson, Advocate Pansy Tlakula, has asked parliament to amend Popia to allow the IR to impose immediate sanctions on offending
NONCOMPLIANT ORGANISATIONS MAY FACE SOME EMBARRASSMENT AND REPUTATIONAL DAMAGE BY BEING IN THE PUBLIC SPOTLIGHT
organisations, rather than wait for the enforcement notice process to run its course
IMPACT ASSESSMENTS VERSUS COMPLIANCE FRAMEWORKS
Topping the lengthy list of documents to have on hand when the IR visits are per-
SECURITY IS KEY
sonal information impact assessments and compliance frameworks These documents are an area of uncertainty for many organisations
To date, the IR has not issued a guidance note or template on either of these documents However, from organisations’ engagements with the IR, we understand a personal information impact assessment is a risk assessment looking at the risks associated with the organisation’ s information processing activities and the level of risk with reference to the provisions of Popia A compliance framework must demonstrate how the organisation intends to address these risks and the steps it has taken, or intends to take, to comply with Popia’ s requirements
Some organisations are under the mistaken impression that a security policy or access management policy constitutes a compliance framework This is not so The Popia compliance framework must specify exactly what steps are being taken to
comply with Popia, in particular each of the conditions of lawful processing
TECHNICAL MEASURES ARE NOT ENOUGH
Another common misperception is that Popia compliance and data breach prevention are mainly about technology One of the conditions for lawful processing of personal information is that an organisation must put in place appropriate technical and organisational security measures to prevent unauthorised access to personal information under its control Organisations often emphasise the technical measures they have in place to prevent data breaches but overlook the organisational measures
The IR has stressed that organisations must pay attention to the operational measures taken and particularly the conduct of their employees Employee error is the cause of most data breaches in SA
A common error is sending an email to the wrong
person by mistake The consequences can be severe if the misdirected email is, for example, an employee’ s salary advice or a customer’ s unique requirements
This raises an important question: does a single missent email constitute a data breach and, if so, must the organisation notify the IR?
IS A SINGLE EMAIL A NOTIFIABLE DATA BREACH?
As it stands, Popia does not contain a risk or materiality threshold for reporting a data breach This is unlike the EU, where only data breaches posing a high risk to individuals’ rights and freedoms have to be reported to the data protection authorities
Popia states that any data breach, regardless of form or size, must be reported if there are reasonable grounds to believe an unauthorised person has accessed or acquired someone else’ s personal information However, if the organisation reacts immediately, such as by contacting the unintended recipient to delete the missent email, and the person confirms it has been deleted, it may not be necessary to notify the IR
Ultimately, the question is whether there the organisation reasonably believes the personal information has been accessed or acquired
GREEN - GO, RED - STOP
Another common misconception is that the processing of personal information is only ever possible with the
data subject’ s consent This is not so Popia provides for several justifiable grounds for the processing of personal information based on necessity, for example where the processing is “ necessary ” for the conclusion or performance of a contract or where it is “ necessary ” to comply with an obligation in law
Relying on consent has its limitations There is a belief that as long as an organisation has the consent of a data subject to process their personal information, there is nothing to worry about Not so fast Consent can be withdrawn at any time and is therefore not an ideal basis on which to rely in all cases
There are certain situations where consent will be required such as the processing of special personal information, which includes photographs and videos, in the absence of a legal obligation to do so What then would one do at corporate events where photographs are taken of the guests?
Obtaining consent in these circumstances can be tricky, and we can only applaud the ingenuity of the company that devised a novel solution The guests were asked to wear a red name tag if they did not want to be photographed and a green tag if they agreed As a result, its photographer had an easy time identifying who consented and who did not, and there was no danger of posting the wrong pictures Even Popia, a complex piece of legislation, can bring out South African creativity
Transformative year for South African businesses Danger in data breaches
Jonathan Goldberg & John Botha Global Business Solutions
South African businesses face a watershed year in 2025 as they navigate unprecedented technological advancement, regulatory changes and economic pressures
Three major themes are set to reshape the employment landscape: the accelerating impact of artificial intelligence (AI), the implementation of the Employment Equity Amendment Act together with various other statutes, and intensifying wage pressures amid challenging economic conditions
AI revolution in South African workplace
The true impact of AI on South African workplaces will crystallise in 2025 as organisations begin to comprehend the opportunity costs of delayed AI adoption
fully This technological revolution is already reshaping core business processes, with Global Business Solutions (GBS) leading the charge through their groundbreaking disciplinary enquiry BOT the world s first of its kind which was successfully implemented across numerous businesses in 2024
Organisations must prepare for fundamental shifts in their operational paradigms
These include:
● Significant changes in organisational skill requirements and competency frameworks;
● Enhanced change management capabilities among leadership and staff;
● Potential restructuring to accommodate AI-driven processes; and
● The necessity for robust policy frameworks that address AI ethics and cybercrime
Organisations can expect
rapid expansions of BOT technology to other labour relations processes, thus they must ensure their policies and procedures align with both ethical considerations and legal requirements in the AI space
The new employment equity landscape
The implementation of the Employment Equity Amendment Act brings unprecedented changes to SA s workforce transformation agenda
The introduction of five-year numerical targets for designated persons across 18 sectors marks a significant shift in how organisations approach employment equity
This new dispensation demands:
● Comprehensive policy realignment;
● Precise workforce planning with a five-year horizon;
● Enhanced recruitment and selection procedures;
● Structured career and succession planning initiatives; and
● Robust retention strategies
Real-time monitoring of management decisions becomes crucial, so necessitating the implementation of sophisticated employment equity technology platforms These will be essential in tracking progress to ensure compliance and facilitate informed decision-making
Wage pressures in a challenging economy
The convergence of low economic growth and employee productivity concerns creates challenges for wage negotiations in 2025 With the national minimum wage expected to increase by about 1 5% above inflation, and sector negotiations likely to push for even higher increases, organisations must develop innovative approaches to maintain sustainability
This economic pressure point requires:
● Strategic workforce-planning;
● Enhanced productivity measures;
● Innovative compensation structures; and
● Agile business models
Legislative changes
The regulatory landscape continues to evolve with several changes on the horizon:
● The Companies Amendment Act implementation;
● The potential promulgation of Traditional Healers Regulations;
● Amendments to smoking legislation;
● The Employment Services Amendment Bill addressing platform workers and foreign nationals; and
● Comprehensive changes to the Labour Relations Act,
Basic Conditions of Employment Act and the Code of Practice on Dismissals
LOOKING AHEAD
While 2025 presents challenges for SA’ s businesses, it offers unprecedented opportunities for organisations willing to embrace change and innovation Success will depend on the ability to:
● Rapidly adapt to technological changes;
● Meet employment equity requirements effectively;
● Navigate wage pressures sustainably; and
● Maintain compliance with evolving legislation
Organisations that approach these challenges with strategic foresight and adaptability will be best positioned to thrive
The convergence of these factors makes 2025 a pivotal year for South African businesses It present opportunities for organisations to revolutionise their operations, enhance their equity profiles and build sustainable business models for the future
/123RF EVKAZ
BUSINESS LAW & TAX
Impact of JSE rejuvenation project
Jordan Maze, Vicky Borg-Jorgensen, Azariah Alexander & Lerato Ntseke ENS
The JSE undertook a “rejuvenation project” that included, among other things, a review of the composition and appropriateness of Section 19 (Specialist Securities) of the JSE Listings Requirements (Section 19)
This project resulted in changes to both the JSE listings requirements and the JSE debt listings requirements (DLRs), replacing the latter in its entirety with the new debt and specialist securities listings requirements (DSSRs)
These amendments came into effect on November 11 2024
What’s the practical impact of the “rejuvenation project”?
Existing issuers may be required to amend their programmes and/or products listed with the JSE, and new issuers (together with their sponsors and advisers) should ensure that new programmes and/or products are drafted, to align with these changes, which are discussed briefly below
What are the main changes to the JSE listings requirements?
The amended JSE listings requirements have, among other things, included a new Section 23 (BEE Segment) which required the deletion of certain BEE provisions from Section 4 (Conditions for Listing) and removed Section 19 in its entirety dealing with Specialist Securities (which are now addressed under the new DSSRs, as discussed below)
Depositary receipts (DRs)
are now governed by an amended Section 18 (Secondary Listings and Depositary Receipts) Issuers of unsponsored DRs must now, among other things, be regulated under the Banks Act of 1990 (or the equivalent foreign legislation), have the relevant expertise to issue securities (or access to such expertise) and be generally acceptable to the JSE (having regard primarily, but not only, to the interests of investors and the objects of the Financial Markets Act of 2012) Depositories responsible for unsponsored DRs are required to disclose their duties on the SENS platform and all financial data pertaining to the underlying entity should be accessible within 10 business days of its publication on the entity’ s website
What does this mean for the DLRs?
CHANGES ARE AFOOT
With effect from November 11 2024, the DLRs have been replaced entirely by the new DSSRs, subject to certain transitional arrangements discussed below
The DSSRs now incorporate provisions dealing with Specialist Securities (which were previously dealt with in Section 19) These provisions were redrafted in their totality and repackaged based on the type of issuer
Structured products were removed from the definition of “debt securities” , effectively limiting debt securities to only instruments with debt characteristics, namely those that are “distinctive debt securities” or “ordinary debt securities” Credit-linked notes, redeemable preference shares, asset-backed debt securities, securitisations, convertible notes and
IN YOUR COURT
project bonds now all fall under the category of a “distinctive debt security” and are accordingly Debt Securities and are not considered to be Specialist Securities
A new definition, “structured products” , was introduced being investment products “whereby a derivative, or combination of various derivative or other strategies have been used” to achieve a specific investment outcome, and would now include products such as an AMC or an ETN, which structured products now form part of and are treated as Specialist Securities along with warrants and products with a participatory interest in an ETF or AMETF
Transitional arrangements
The JSE has set out certain transitional arrangements in
relation to the new DSSRs to allow sufficient time for sponsors and issuers to adopt them
Issuers of relevant structured products had until January 31 to implement a system for publishing daily unwind levels and make them available on their websites and to include a link to the unwind levels in their pricing supplements
In respect of year-ends commencing from November 30 2024: (i) issuers with both ordinary shares and debt securities listed on the JSE would not be required to comply with certain financial reporting disclosures set out in the DSSRs; and (ii) the annual compliance certificate of an issuer must (in addition to a declaration regarding the issuer’ s compliance with all applicable listings requirements during the previous financial year), declare whether or not there are any changes to the issuer’ s placing document in terms of the DSSRs resulting from any information contained in the placing document, in relation to the issuer, being outdated in a material respect
These changes require issuers, sponsors and advisers to navigate the new regulatory landscape to ensure compliance with the JSE’ s updated rules and regulations, as discussed briefly above
● Reviewed by Stephen von Schirnding, Executive in ENS’ Banking and Finance Department
Trustee ‘less than truthful’ in dealings, court f inds
In 2014 Dr Jana Annelise Pretorius, a specialist wildlife veterinarian, founded The Rhino Pride Foundation Trust
The main objectives of the trust are the creation of a fund to end poaching of rhinos, and the advancement and protection of medical care for rhinos
In 2017 Pretorius met Tertia Jooste, an attorney, and James Lievens, a banker, who shared common interests with Pretorius and whom she invited to join the trust as trustees In 2019, Lievens procured a substantial donation (R50m) from a foreign donor for the use by the trust of its main objects The terms of the donation, inter alia, allowed for payments over a period of time and for the termination of the donation without any reason The trust was therefore vulnerable to the donor in the event of loss of confidence by the donor, in particular
THE TRUST UNRAVELS
The trustees (Pretorius, Jooste and Lievens) enjoyed
P E T E R B L A N C K E N B E R G
a good relationship until late 2021 at which time Jooste and Lievens became concerned about Pretorius’ administration of the trust and management of the rhino farm At this time Pretorius resided on the farm and provided veterinary services for a monthly fee She failed to adhere to budgets for improvements, appointed her fiancé to certain activities of the trust and operations of the farm, and generally behaved in a fashion which caused a loss of confidence by her fellow trustees In essence, they claimed, she began to act as a sole trustee rather than as a joint trustee
Notwithstanding various endeavours by Jooste and Lievens, the relationship between the trustees broke
down completely and, when the donor became aware of this, it gave notice that no further funds would be supplied by the donor until the relationship between the trustees had been restored or the trust had been placed in a position in which the main objectives could be achieved
In terms of the Trust Deed, inter alia, a trustee could be required to resign if the remaining trustees unanimously agreed in writing that such resignation take place Jooste and Lievens accordingly passed two resolutions, the first that Pretorius should resign as a trustee, and, the second, appointing a replacement trustee
OFF TO COURT
Pretorius thereafter approached the high court for an interdict that such resolutions be prevented from enforcement pending the finalisation of an action to set aside such resolutions Pretorius alleged there was a dispute of fact and the matter could not be heard by way of Application The high court
granted the interdict
Jooste NO and another v Pretorius and Others [2024] ZASCA 130
Jooste and Lievens appealed to the Supreme Court of Appeal That court held unanimously that on the facts alleged in the affidavits there were sufficient grounds for the court to find on the facts without oral evidence (the Plascon-Evans rule), thus allowing the matter to be heard by way of Application
In addition, the court found that Pretorius in her various affidavits had been less than truthful and had sought to mislead the court
FIRING A TRUSTEE
The court held that where a Trust Deed contains a provision that trustees may require one of their own to resign, then such right cannot be invoked arbitrarily, irrationally or capriciously, for example, based on the will, preference or convenience of the majority of the trustees; or where there is no evidence that the interests of the trust
and its beneficiaries would be prejudiced”
Furthermore, such right granted to trustees in a Trust Deed should be borne in mind together with Section 9 and Section 20 of the Trust Property Control Act
Section 9 of act requires that “(1) A trustee shall in the performance of his duties and the exercise of his powers act with the care, diligence and skill which can reasonably be expected of a person who manages the affairs of another
Section 20 act requires that (1) A trustee may, on the application of the master or any person having an interest in the trust property, at any time be removed from his office by the court if the court is satisfied that such removal will be in the interests of the
THE COURT ORDERED PRETORIUS TO PAY THE COSTS OF THE PROCEEDINGS IN HER PERSONAL CAPACITY
trust and its beneficiaries” Importantly, the court pointed out that the provisions of Section 20(1) do not state that the power to remove a trustee is exclusive to the court and held that there is no reason to read such limitation into Section 20(1) Accordingly, a Trust Deed may confer that right on some other person, as was done in the case before it
BAD FAITH The court reversed the interdict and found that the unanimous resolutions of the other trustees (Jooste and Lievens) to require Pretorius to resign her position as a trustee were appropriate in the circumstances It therefore upheld the resolutions and further displayed its displeasure in the behaviour of Pretorius by ordering her to pay the costs of the proceedings in her personal capacity The court found that she had acted in bad faith and recklessly
● Peter Blanckenberg is a Director at Blanckenberg & Associates Inc
/FREDDY MAVUNDA
BUSINESS LAW & TAX
EEA amendments now in play
• Various definitions of Employment Equity Act have been amended or substituted
Suemeya Hanif & Kerry-Anne do Couto ENS
On November 28 2024, the Government Gazette published a proclamation by the President of the Republic of SA confirming the commencement of the Employment Equity Amendment Act 4 of 2022
On January 1 2025, the following sections and schedules of the Employment Equity Amendment Act came into operation:
● Section 1:
1 1 The definition of “designated employer” no longer includes “ an employer who employs fewer than 50 employees but has a total annual turnover that is equal to or above the applicable annual turnover of a small business in terms of the Schedule 4” Schedule 4, containing the turnover thresholds applicable to designated employees, has been deleted
This means employers who employ fewer than 50 employees (irrespective of turnover) are not required to comply with the obligations of a designated employer
relating to affirmative action, including the development and implementation of employment equity plans, reporting obligations and the submission of employment equity reports to the department of employment & labour
1 2 The definition of “ people with disabilities” has been substituted with “includes people who have a long-term or recurring physical, mental, intellectual or sensory impairment which, in interaction with various barriers, may substantially limit their
SECTION
15A
IS A NEW SECTION THAT INTRODUCES SECTORAL NUMERICAL TARGETS
prospects of entry into, or advancement in, employment, and ‘ persons with disabilities’ has a corresponding meaning” This is an enhanced or expanded definition that aligns with the international definition in the United Nations Convention on the Rights of Persons with Disabilities, 2007
1 3 The definition of “ sector” , meaning “ an industry or service or part of any industry or service,” has been inserted
● 2 Section 8 has been amended to remove the requirement for the Health Professionals Council of SA (HPCSA) to certify psychological testing and similar assessments used for assessing employees
● 3 Section 14 has been repealed It provided that:
14 Voluntary compliance with this Chapter An employer that is not a designated employer may notify the Director-General that it intends to comply with this Chapter as if it were a designated employer ”
● 4 Section 15A is an entirely new section that introduces sectoral numerical targets
The employment & labour minister is given the authority to set numerical equity targets for specific sectors of the economy This allows for tailored transformation goals in industries such as education, finance and agriculture
● 5 Section 16, which deals with the consultation obligations of employers, has been amended to clarify that, if there is a representative trade
FAIRER SHARE
union in a workplace, a designated employer need only consult with this union and not with its employees
● 6 Section 20, which deals with employment equity plans, has been amended to provide that the “numerical goals set by an employer in terms of subsection (2) must comply with any sectoral target in terms of section 15A that applies to that employer
mum Wage Commission on the remuneration and benefits received in each occupational level of that employer's workforce ”
The section previously required this information to be submitted to the Employment Conditions Commission established by section 59 of the Basic Conditions of Employment Act
”
A designated employer is therefore required to set numerical targets in line with the applicable sectoral targets set by the minister by regulation The proclamation is silent on when the final regulations will be published
● 7 Section 21 has been amended to remove a specific date for annual submissions of employment equity reports The amendment empowers the minister to make regulations with regard to the requirements of employers in submitting their employment equity reports and the timing of the submission
● 8 Section 27 has been amended to provide that:
“Every designated employer, when reporting in terms of section 21(1), must submit a statement, as prescribed, to the National Mini-
● 9 Section 36 has been amended to provide labour inspectors with the authority to request and obtain a written undertaking from a designated employer, within a specified period, to comply with sections 36 (a), (b), (c), (f), (h), (i) or ( j), ie to, among other things, consult with employees, conduct an analysis, publish its report and assign responsibility to one or more senior managers ● 10 Section 37 has been amended to empower the minister to make regulations regarding the manner of service of compliance orders on designated employers in relation to the affirmative action aspects of the Employment Equity Act Section 37 further provides that a labour inspector may serve a compliance order on a designated employer if the employer has
failed to comply with sections 16, 17, 19, 22, 24, 25 or 26 of the EEA It notably excludes sections 15 and 15A This means if an employer fails to comply with sections 15 or 15A (the sections relating to sectoral numerical targets) it may not be penalised by means of a compliance order ● 11 Section 42 has been amended to include section 42(aA) This empowers the minister to assess “whether the employer has complied with a sectoral target as set out in terms of section 15A applicable to that employer” Section 53, which deals with state contracts, has been amended to provide that the minister may only issue a compliance certificate if the employer has complied with the sectoral numerical targets set by the minister for the relevant sector, or has demonstrated a reasonable ground for noncompliance The minister must be satisfied that:
11 1 The employer has submitted a report in terms of section 21 of the Employment Equity Act; 11 2 There is no finding by the CCMA or a court within the previous 12 months that the employer breached the prohibition on unfair discrimination; and 11 3 The CCMA has not issued an award against the employer in the previous 12 months for failing to pay the minimum wage in terms of the National Minimum Wage Act 9 of 2018 A certificate issued in terms of section 53 is valid for 12 months from the date of issue or until the next date on which the employer is obliged to submit a report in terms of section 21 of the EEA, whichever period is longer ● 12 Section 64A, which provided for the amendment of annual turnover thresholds in Schedule 4 of the act, has been deleted (as there are no longer any applicable turnover thresholds)
Key fintech trends point to bright future in Africa
The number of tech startups in Africa has been rising steadily over the past few years, fuelled by increasing smartphone ownership, declining internet costs, expanded network coverage and a rapidly urbanising young population
Our Africa Guide Key FinTech Trends in 2024 outlines the key trends and developments that have shaped the fintech landscape in various jurisdictions, including Botswana, Ethiopia, Kenya, Mauritius, Namibia, Nigeria, SA, Tanzania, Uganda and Zambia
The guide reveals that, despite the prevalence of global economic challenges,
investors continue to display confidence in the potential of African fintech While venture capital investment remains robust in countries such as SA, other African startups have diversified their funding sources to include debt financing, governmentbacked funding initiatives, corporate venture capital funds, incubators and angel investors
AFRICANISATION OF GLOBAL TECHNOLOGY
The fintech horizon is expected to continue evolving with trends such as the Africanisation of global tech and the rise of embedded fintech Fintech is penetrating all sectors, including insurance, savings and investments, utilities, mining, trade, healthcare and
education Non-fintech firms are also integrating digital financial services into their offerings African startups have continued to adopt an international approach, with several firms expanding their services worldwide This trend includes acquisitions outside the continent and the expansion of fintech services globally
A significant portion of the African population remains unbanked Fintechs in Africa have been providing solutions to create seamless, borderless transactions, aiming to tap into this large market
Many banks have also been partnering with new fintech companies to solve this problem
Digital banking and mobile money have experi-
enced a surge in Africa Services such as M-Pesa have become successful cellphone-based financial services in the developing world The digital payments market has matured faster in Africa than in Europe, with the number of electronic payment transactions growing exponentially Fintech digital technology systems and the buy now, pay later (BNPL) models have seen a surge in consumer adoption
The convergence of AI technologies introduces a spectrum of emerging trends and opportunities AI, blockchain, cloud and data are central to the function of fintech technologies and are being leveraged to the advantage of African fintech firms
Blockchain technology has made significant inroads in Africa, enabling smoother domestic payments, crossborder transactions, peer-topeer lending and supply chain finance This technology is also being leveraged for inflation hedging Regulatory developments are shaping the fintech landscape in Africa Fintechs have acquired new licences and expanded across the continent Mobile network operators (MNOs) have become more active in the fintech space The potential for MNOs to be granted mobile money licences has increased competition with traditional banking institutions, especially in West Africa where there is a focus on mobile and online banking
LOOKING FORWARD
The African fintech industry has shown remarkable resilience and innovation over the past few years Despite challenges, the sector has experienced significant growth and is poised for even more expansion in the coming years
The fintech sector in Africa is at a crossroads, with innovation driving change and regulation shaping the future
The need for a balanced approach to regulation that fosters innovation while protecting consumers and maintaining financial stability is self-evident
The future of fintech in Africa is bright and presents exciting opportunities that will revolutionise financial services on the continent
Mili Soni Bowmans
BUSINESS LAW & TAX
Usufruct with a twist
Judgment highlights the importance of how carefully a will must be worded
Karel Kogler
Herold Gie Attorneys
Aregular occurrence in the world of the drafting of wills is when the maker of a will (the testator/testatrix) expresses a wish to bequeath property to one or more heirs, subject to a usufruct over the property in favour of another heir
A will may, for example, specify that the testator bequeaths his immovable property (for instance his residential property) in equal shares to his two children, subject to a lifelong usufruct in favour of his wife
After the death of the testator the property will be registered in the names of the two children, but their ownership in the property will be limited to the effect that the wife will have a lifelong right to use the property and receive the property’ s fruits
The wife will, for the duration of her lifetime, be entitled to use the property as her place of residence and she will also be entitled to earn income from renting the property out
The children would then basically have no use or benefit of the property while the wife is alive
Upon the wife’ s death the usufruct would terminate,
and the children will be at liberty to deal with the property without the prior restrictions of the usufruct
Hart v Hart
In Hart v Hart the high court dealt with a dispute which emanated from a testamentary provision in respect of a usufruct In this case the right of usufruct was however extended in a notso-common fashion
The late Peter Dionysius Hart died on September 22 2013 The deceased’ s will stipulated that his four sons were to inherit the whole of his estate in equal shares All four sons were also appointed as executors of his estate His first three sons were born
THE WIFE WILL, FOR THE DURATION OF HER LIFETIME, BE ENTITLED TO USE THE PROPERTY AS HER PLACE OF RESIDENCE
from a previous marriage and the fourth son was born from his marriage with Margaret Hart (Mrs Hart) The first three sons will be jointly referred to as “the respondents” The deceased also included a further provision in his
BENEFIT TO OTHERS
will for Mrs Hart to not only have a usufruct over all his assets, but to also have the extraordinary right to dispose of the assets and reinvest the proceeds, provided that the executors approve of such reinvestment It is worth noting that, as per the will, the executors may not unreasonably withhold such approval
THE DISPUTE
The asset upon which the testamentary provisions had bearing was an immovable property situated in Camps Bay, which was operated as a guest house
Due to Mrs Hart’ s age she no longer wished to operate the property as a guest house, but wanted to sell the property, reinvest the proceeds and live off the income derived from the investment She also procured a purchaser who offered to purchase the property for R17m
The court had to decide
whether Mrs Hart had an unfettered discretion to sell the property, whether the will granted the respondents the right to consent to the sale of the property and the reinvestment of the proceeds, whether the respondents had no right to refuse the sale of the property and whether the approval to reinvest the proceeds of sale had been unreasonably withheld by the respondents
The court held that upon a purposeful interpretation of the will, the deceased intended for the property to be a cushion to prevent Mrs Hart from falling into financial hardship after his death Even though the testamentary clause which bequeathed the assets to the sons was the dominant clause, the clause relating to the creation of the usufruct was not in conflict with the dominant clause and the deceased intended for the two clauses to co-exist
TAXING MATTERS
The respondents were of the view that for them to decide on the reinvestment of the proceeds of sale, they had to consent to the sale itself
The court, however, found that there was no provision in the will that required the respondents’ consent for the sale of the property It was held that Mrs Hart had the absolute discretion to sell the property and that the respondents had no right to frustrate this process
The court interpreted the testamentary clause relating to the creating of the usufruct as placing a duty on both Mrs Hart and the respondents to preserve the capital of the proceeds of sale This is in line with the legal principles surrounding usufructuary property in that it may not be consumed or destroyed by the usufructuary and must be maintained to preserve its value Mrs Hart therefore had to reinvest the proceeds, and the respondents had to approve of the investment (which approval may not unreasonably have been withheld)
The high court ordered the respondents to sign all documentation necessary for sale and transfer of the property and to approve of the reinvestment scheme and sign any documentation required to give effect thereto Mrs Hart was therefore entitled to insist on the sale of the property with a view to the reinvestment of the proceeds
An argument can, however, be made that since the reinvestment plan was not before the court, the court should not merely have ordered the respondents to approve of the reinvestment plan and to sign any documentation to give effect thereto A more acceptable and sustainable approach may have been that Mrs Hart would have been entitled to sell the property provided that the reinvestment plan is approved by the respondents The court should then have directed the respondents to apply their minds to the reinvestment plan and to ensure that the reinvestment plan meets the requirements of looking after Mrs Hart and preserving the capital
This judgment highlights the importance of how carefully a will must be worded to set out the exact wishes of the testator
The respondents’ submission that the reinvestment was only to be in another immovable property was rejected by the court and it was held that Mrs Hart was entitled to invest the proceeds in any other asset Mrs Hart proposed to reinvest the proceeds in a financial investment structure which would preserve the capital and allow her to live off the interest The court similarly rejected the respondents’ contention that financial securities by its very nature erodes capital and held that the respondents’ insistence on reinvesting the proceeds in another immovable property amounted to unreasonably withholding their approval
Addressing immovable property transfer hitches
Estian Haupt, Leonard
Willemse & Angelique
Stronkhorst
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
THE ISSUE
One of the requirements to qualify as a section 42 assetfor-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 (Eighth Schedule) 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
ON THE DATE OF THE DISPOSAL, THE TRANSFEROR MUST HOLD AT LEAST 10% OF THE EQUITY SHARES OF THE TRANSFEREE
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 significant adverse tax if implemented incorrectly
● Estian Haupt is Associate Director: SA Direct Tax, Leonard Willemse is Associate Director: SA Indirect Tax and Angelique Stronkhorst is senior associate at Specialist Tax and Transaction Advisers AJM
/123RF BURDUN
BUSINESS LAW & TAX
Benefits outweigh challenges
• Confluence of geopolitics, energy, and trade is driving change in African mining industry
Jonathan Veeran, Meluleki
Nzimande & Tobia
Serongoane
Wentzel
Webber
The African mining sector is at an exciting juncture in 2025 Three macro trends are converging simultaneously within the industry, creating opportunities for mining operators, African governments and communities
These trends include the West’ s growing interest in Africa’ s mining resources aimed at matching the strides made by Eastern competitors led by China the just energy transition and the evergrowing influence of the Agreement Establishing the African Continental Free Trade Area (AfCFTA)
The interaction of these trends creates new complexities for operators and governments to navigate, yet the benefits of shared investment and economic growth across the continent are expected to outweigh the challenges posed by such complexities
The key challenge facing the continent’ s political leaders is whether the right environment can be created to capitalise on what may be a generational opportunity to reset the African structure of economies in a manner that fosters industrial development and maximises the benefits accruing to the citizens
Geopolitics and financing
play important roles in influencing the behaviour of key actors in the global mining industry China’ s rapid economic growth was a major driver of the global commodity boom of the early 2000s
While demand for commodities has fluctuated since, China has continued to strengthen its strategic positioning in key mining jurisdictions on the continent, such as Zambia, the Democratic Republic of the Congo (DRC), Zimbabwe and Namibia
For example, in 2022 China owned 72% of all cobalt and copper mines in the DRC, with Chinese mining and battery companies investing about $4 5bn in lithium mines over the recent years, includ-
AFRICA’S INABILITY TO MANUFACTURE ITS OWN MINING EQUIPMENT, WITH A FEW EXCEPTIONS, IS A MISSED OPPORTUNITY
ing in Namibia and Zimbabwe Recognising the gap that exists between themselves and the East, Western nations and companies are increasingly competing as a source of investment or finance for operators on the continent as the race for rare earth metal intensifies Given the ongoing geopo-
RICH RESOURCES
litical tensions since the entry of Donald Trump into the political stage in 2017 and the evolving political dynamics in Europe, competition for African battery minerals between East and West is likely to increase
Underpinning these manoeuvres worldwide, and the heightened status of the DRC and Zambia in the global mining sector, is the energy transition from fossil fuels to green energy
China correctly identified early on that copper, lithium, nickel and cobalt would be the commodities crucial to the future development of battery and computing technology The country’ s dominance of the electric vehicle (EV) space, for example, is in part due to its preponderant access to these key resources Production of EV batteries requires cobalt, nickel and lithium, and the creation of large batteries needed to store the energy generated by solar and wind power likewise requires these minerals
Based on conversations with operators in the sector, mining investors are not just
paying attention to where minerals are located in Africa, but the policy environment in the countries housing these resources
Investors have continued to invest in these countries due to the quality of the deposits located there (for instance, the DRC), but Namibia and Zambia have garnered greater attention partly because of their political stability, policy predictability and lower levels of corruption according to Amnesty International [refer to most recent Amnesty International report]
A further influence on the behaviour of African governments is that they no longer want to house the extraction and export of commodities Recognising the crucial role rare earth metals play in the transition from fossil fuels, there is growing sentiment across the continent that Africa’ s economies must go beyond that of a supplier of materials and evolve into a participant in the value chains of the future AfCFTA is fundamental to changing that narrative
AFCFTA & LOCALISATION
The objectives underpinning AfCFTA extend beyond mere intra-African trade AfCFTA addresses a broad milieu of other factors, such as trade, including logistics and energy infrastructure, and seeks to ensure predictability at borders to facilitate the movement of goods from one market to another Crucially, it also emphasises localisation
Most mining equipment used in Africa is not manufactured on the continent, with a significant portion being imported, particularly from China The continent’ s inability to manufacture its own mining equipment, with a few exceptions, represents a missed opportunity for job creation, skills transfer and locally driven manufacturing
When a miner purchases Chinese machinery, the manufacturer often sends a team from China to maintain and, depending on the task, operate the machine This creates a skills dependency that can only be fulfilled by the manufacturers themselves Western miners followed the same playbook in the past
An exciting example of how the AfCFTA can drive trade and economic beneficiation, driven by the finance of Western and Eastern investors, is the rules of origin Goods or parts manufactured on the continent receive preferential tariffs when moved across borders to markets within Africa, as well as to the US and the EU
As a result, Eastern and Western investors have a greater incentive to establish manufacturing facilities on
the continent, which provides an opportunity to use local commodities as inputs for these goods If localisation can be achieved at scale across the continent, new supply chains, subsidiary economies and manufacturing bases can develop which can drive economic growth across entire countries, benefiting hundreds of local communities Getting there requires governments and operators to recognise the opportunities created by AfCFTA and foster an enabling policy and regulatory environment, discussed here in greater detail It is in the interest of the mining countries to consider what it would take to establish mineral trading platforms on the African continent The design of such platforms should ensure a significant portion of revenue from trade conducted on such platforms remains on the continent to support the economic development and value-addition on battery and other minerals
The theme of the 2025 Investing in African Mining Indaba Futureproofing Mining Today underscores the urgency of aligning policy, investment and community development to secure sustainable growth By leveraging the opportunities presented by the West’ s growing interest in Africa’ s resources, fostering localisation through AfCFTA and embracing innovation, African governments and operators can not only navigate the complexities of these trends but also position the continent as a global leader in the value chain for critical minerals
Tax exemptions for Sars-approved institutions
Estian Haupt, Leonard
Willemse & Dawid
Oosthuizen
AJM
A tax-exempt institution is an entity, either wholly or partially, exempt from income tax under section 10 of the Income Tax Act 58 of 1962 (IT act) Such entities include public benefit organisations (PBO), recreational clubs, membership associations and homeowners associations, among others
The reason for the taxexempt status stems from the activities and nature of these institutions, which warrant such preferential treatment These exemptions generally allow charities, sports clubs, societies and even trade unions to conduct their activities without the burden of paying income tax
Importantly, tax-exempt status can only be obtained if
the Commissioner of the South African Revenue Service (Sars) is satisfied that the institution complies with specified requirements This involves an approval process that must be undertaken with Sars An institution will not automatically obtain taxexempt status by registering as a nonprofit company, being a nongovernment organisation (NGO), association, club or merely registering as a taxpayer
The qualifying criteria differ for each type of institution
However, a commonality among these institutions is that their constitutions, written instruments or founding documents must meet certain specifications The nature of activities, funding sources and so on must also meet specific requirements
These requirements must be contained in an institution s founding documents
For example, the institution may not distribute funds or profits in the form of dividends or the like Additionally, on dissolution, the institution s assets must be disposed of to a similar institution or the government There must not be a forprofit objective
WHAT IS EXEMPT?
Even where Sars approves an institution as tax-exempt, it does not necessarily mean that all its income will be exempt from income tax For example, levies received by or accrued to homeowners associations are exempt from income tax Other forms of income, such as commercial rental income, will be fully taxable
The receipts and accruals of PBOs resulting from their public benefit activities will be fully exempt In contrast, any other business activity
(such as commercial rental income) will not enjoy total exemption Specific associations might qualify for total exemption provided they have particular objectives and funding from specific sources
Welfare organisations for purposes of VAT
An exemption from income tax does not necessarily extend to value-added tax (VAT) The Value-Added Tax Act No 89 of 1991 does, however, contain provisions for the preferential VAT treatment of certain entities The VAT Act contains a more restrictive concept for socalled welfare organisations , limited to a particular pool of PBOs The VAT Act also includes the concept of an association not for gain , the relevance of which is that any donation received by such an association not for gain would fall outside the
scope of VAT
There is no overall VAT exemption for an entity type, but the VAT treatment of certain types of transactions is determined by the nature of the entity concluding them
Going through an approval process is not without reason Strict compliance measures have been implemented to avoid abuse of these institutions for tax purposes Furthermore, a delicate balance must be maintained so that tax-paying forprofit taxpayers are not prejudiced if exempt entities conduct similar activities but are not taxed
A further reason is that the Financial Act Task Force (FATF) has specifically identified nonprofit organisations as vulnerable to terrorist financing abuse and money laundering Sars has, therefore, undertaken to carefully oversee tax-exempt institu-
tions to prevent their use for illegal activities
CONCLUSION
In summary, the IT Act provides for institutions with preferential tax treatment Even where such a nonprofit company, association or recreational club meets the requirements of the act, an active application process must be undertaken to obtain tax-exempt status A compliant written instrument is essential to obtain this status, among other requirements Once the relevant approval is given, strict compliance requirements must be followed to prevent any issues with Sars Consulting a reputable tax adviser is necessary to ascertain whether the entity qualifies for full or partial exemption and then to identify the correct application process for the relevant exemption
Budget: key tax proposals to look out for
• Zero-rating of certain chicken products for VAT and changes to CIS taxation are possibilities
Leonard Willemse, Estian Haupt & Shirlynn Smith AJM
OOn February 19 2025, South African Finance Minister Enoch Godongwana will deliver his budget speech
Much like the current economic climate and the global political position, the 2025 budget proposals are all but certain Like the 2024 budget, taxpayers hope for no big-ticket tax rate increases but, this year, they hope for relief from the fiscal drag due to inflation-based adjustments to the income tax brackets
It is anticipated, or at least hoped, that Godongwana will remain committed to addressing SA’ s increasing budget deficit amid the continued pressure of state employment costs and increasing debt-service costs
KEY MATTERS TO LOOK OUT FOR
● Zero-rating of chicken
The South African Poultry
Association applied to the government in 2024 to have certain chicken products zero-rated for value-added tax (VAT) purposes to make this essential food more affordable Public comments on this proposal highlighted the significant economic benefit of VAT-free chicken It is forecasted that the poultry industry could expand production materially to meet increased demand and improve South African citizens ’ accessibility to chicken products
Treasury is expected to review the proposal carefully, and the final decision will likely only be made this month
● Changes to Collective Investments Scheme (CIS) taxation
CONTRIBUTIONS WILL BE CHANNELLED INTO THE FUND TO ENSURE MORE IMPACTFUL ECONOMIC TRANSFORMATION
Government issued a discussion document at the end of 2024 with several proposals for public comment After the (short) period for public comments, a workshop was held in January 2025 to announce the envisaged changes in the 2025 budget speech In broad terms, government is considering whether appropriate legislative changes can be made to clarify the taxation of income (not capital) in a CIS and curb identified abuse involving trading in a CIS
Given the significant comments and substantial impact that any changes may have on the savings industry, it is uncertain whether the envisaged announcement is still on the cards
● Tax rates and credits
Despite speculation that personal income tax rates would be increased for high-income earners, National Treasury did not change the tax rates in the 2024 budget but also did not adjust the tax brackets
Accordingly, Treasury collected additional income tax during the 2025 tax year due to “bracket creep ” Similarly, medical scheme tax credits
(and the interest exemption) remained unchanged
Although taxpayers would be looking for at least inflationary adjustments, the need for additional revenue may mean that government again do not adjust the tax brackets as an “ easy ” way of generating additional revenue ● Transformation Fund designated to support black-owned businesses
The government plans to establish a R100bn Transformation Fund which will be managed in partnership with the private and public sector through the National Empowerment Fund to foster economic transformation by supporting black-owned businesses and small, medium and micro enterprises
This initiative, outlined by trade, industry & competition minister Parks Tau (in a recent parliamentary Q&A), will be financed through private sector contributions in alignment with broad-based black economic empowerment (BBBEE) regulations and other mechanisms under the Competition Act
According to Tau, the fund will draw on various streams of private-sector financing
The enterprise and supplier development element of the B-BBEE Codes of Good Practice mandates companies to allocate 3% of their annual net profit after tax toward developing black-owned suppliers The source of the fund will be raised in line with the B-BBEE Codes of Good Practice and through the Competition Commission’ s public interest participation in terms of section 18(1) of the Competition Act Number 89 of 1998 (as amended) Therefore, it will not require additional funding from the government or have an adverse impact on the budget
The contributions will be channelled into the Transformation Fund to ensure broader and more impactful economic transformation
The fund will be administered by the public and private sectors through a special purpose vehicle located within the NEF
PUBLIC SECTOR WAGE
INCREASE NEGOTIATIONS
Public sector wage negotiations have resumed, with the government offering a new wage increase of 5% The workers have been engaged in negotiations at the Public Service Co-ordinating Bargaining Council ahead of the 2025/26 financial year The Public Servants Association has acknowledged the government’ s improved salary offer and believes the minimal gap between the parties’ positions provides a basis for further engagement In a recent update, salary negotiations at the Public Sector Co-ordinating Bargaining Council, the employer ’ s revised offer included a 5% increase for 2025/2026, up from the previous offer of 4 7% According to the union, this is a significant improvement as there will be two adjustments in the housing allowance for 2025 However, as the negotiations continue toward concluding a collective agreement and mandate, the source and how the increases will be funded remains to be determined
Former minister ordered to pay costs
Peter Blankenberg
Blankenberg & Associates Inc
Former social development minister Bathabile Dlamini, together with Lumka Oliphant, Chief Director of the social development department and former SA Social Security Agency (Sassa) CEO Dr Virginia Petersen, in 2012 commenced action to curtail fraudulent claims for social grants
These processes exposed large scale fraud (as a result of which in excess of 900,000 grants were cancelled) and, in consequence threats were made not only in respect of their own lives but also in respect of the children of Oliphant and Dlamini
Dlamini, after consultations with the Gauteng Commissioner of Police, felt compelled to issue instructions to Petersen to provide private
security for the children of Dlamini and for Oliphant and her children Petersen, who was subject to the authority of Dlamini as social development minister at the time, felt obliged to authorise a contract with a third-party company for the relevant provision of security The cost was R2,008,086
The issue in the Supreme Court of Appeal case Petersen and others v SASSA [2024] ZASCA 173 was whether the contract between Sassa and the third party was lawful and, if not, who should pay the cost of such contract
Unterhalter JA (writing for a unanimous bench) held that Sassa, an organisation created in terms of Sassa Act (act), was prohibited from carrying on any action which was not authorised by the act He referred specifically to sec-
tions 4(2)(b) and 6(1)(a) of the act and declared that these provisions would have authorised Petersen to enter into a close protection service contract in respect of its own staff However, in this case the protection had been provided by Sassa for third parties not employed by Sassa and therefore the conclusion of the contract by Sassa was unlawful
ABUSE OF POWER
In short, Unterhalter JA declared that Dlamini, as minister, should have provided such security by way of a contract entered into through the department Dlamini had unlawfully used her authority to require Sassa to do what the department had a duty to do, and did so without the exercise of reasonable care Further, Dlamini had secured a benefit for herself (the pro-
tection of her own children), which amounted to a clear abuse of power In the circumstances then, the court held that it was just and equitable that Dlamini should be held liable to reimburse Sassa for the benefit that she received, together with the running of interest on the amount due and the cost of two counsel
As for Petersen, in her former capacity as the CEO of Sassa, the court held, as she was placed in a position where a minister, whose directions to which she was statutorily subject, required her to take steps to have Sassa procure and pay for the close protection services and, added to that, the fact that the court accepted that she bona fide thought that she enjoyed the competence to do what the minister had directed, and in circumstances of a very
real threat, that it was not just and equitable that she be saddled with a liability to pay for the expenditure she authorised
Likewise in respect of Oliphant, the court held that she should not be held responsible as Dlamini, as the former minister, and the department had a duty, as her employer, to afford her protection: the fact that this was done by unlawful means as a result of engagements between Dlamini and Petersen was a not a matter for which Oliphant should be held responsible
In consequence of the court s decision that Peterson and Oliphant shared no responsibility for the costs incurred by Sassa, the full liability fell upon Dlamini in her personal capacity
The case presents a sad reflection on the effective-
ness of policing in SA There is, respectfully, no issue with the legal consequences of the judgment However, one might sympathise with the minister, apparently finding at the time that the department did not have sufficient funds to incur the cost of the close security (which was necessary in the face of real and dangerous threats to the persons concerned) had, albeit unlawfully, instructed Sassa to step into the breach in this regard
One should also remember that the awful personal threats were made in direct consequence of the work of the then minister, the then CEO of Sassa and the Chief Director of Communications at the social development department, in their joint collaboration to stamp out the plethora of fraudulent claims for social grants
Packaging similarities get under the skin
• Ruling is an important reminder to brand owners
Liézal Mostert ENS
We have written about the Advertising Regulatory Board (ARB) case of L’Oréal South Africa (Pty) Ltd (L’Oreal) and Nutriwomen (Pty) Ltd before
In this update we discuss the appeal that was lodged against the earlier decision this appeal went to the Advertising Appeals Committee (AAC) of the ARB, where it was considered by advocate Nasreen RajabBudlender SC and others
L'Oréal lodged a complaint under Clauses 8 and 9 of the ARB Code, and it related to the packaging and get-up used in relation to Nutriwomen ’ s DERMACARE range of skincare products
The complaint submitted that the DERMACARE packaging ”substantially copies the get-ups of the Complainant’ s various CERAVE products and exploits the advertising goodwill attaching to the Complainant’ s packaging and goodwill”
THE GET-UP
The CERAVE brand has a getup comprising the following:
● Specific colour codings for its various product categories (white and light blue, white
and dark blue, white and lime green, white and sea green, white and purple);
● A V-shaped colour block over the letters VE in CERAVE;
● A font called DinPro; and
● A sequence of information covering brand name, skin type and product description
L’ORÉAL’S CLAIMS
L’Oréal claims included:
● The current packaging for its CERAVE brand has been in use since 2022;
● There have been substantial sales of the products;
● The packaging has acquired a significant reputation in a short time;
● There have been reports of consumer confusion on social media, and consumers were commenting that the DERMACARE product packaging imitated the CERAVE packaging; and
● Nutriwomen was “deliberately trying to ride on the coattails” of CERAVE
THE RESPONSE BY NUTRIWOMEN
Nutriwomen denied any copying or contraventions of the ARB Code Instead it :
● Argued that the colour combinations used on the respective packaging are common to the industry;
● Claimed that L’Oréal’ s packaging had not been used to the extent that it could be
DERMACARE products are
“substantially similar in colour, wording, design and actual container shapes used it is difficult to accept that Nutriwomen would not know or consider what their competitors’ products looked like it is also implausible that their creative agency did not look at CERAVE or see any similarities between the products Nutriwomen did extensive market research to determine what their customers were looking for, such as larger containers or skin type specific products”
● Combination of elements: Although it “ may be common for certain colours to be used in the skin care industry, CERAVE argues that it is not one element that makes the product packaging unique but the combination of all the different elements raised in their complaint We agree ”
● Intention: The fact that “Nutriwomen didn’t use the ‘V’ in CERAVE is not determinative when one compares the previous packaging of the Dermacare range with the current packaging the change is not simply a gradual evolution but a dramatic change to look substantially similar to the Cerave range”
● Taking advantage: It is “difficult to conclude that Nutriwomen did not seek to take advantage of the advertising goodwill of L’Oréal’ s Cerave
CONSUMER CONFUSION
products” This was a contravention of Clause 8 of Section II of the Code
● Existing concept: There was also a contravention of Clause 9, “which precludes an advertiser from copying an existing advertisement or any part thereof in a manner that is recognisable or clearly evokes the existing concept and may result in the likely loss of potential advertising value this applies even if there is no likelihood of confusion or deception”
● Consternation and confusion: It is “clear from social media users who remarked on the similarities between the two products that Dermacare ’ s packaging is sufficiently similar to cause consternation and confusion in the market”
The affidavit submitted by the design agency of Nutriwomen
During the hearing of the matter, the AAC provided an opportunity for Nutriwomen to submit a further affidavit from its design agency, New Media Design Agency, to advise the AAC of the considerations it took into account in redesigning the DERMACARE packaging The original packaging is set out below The AAC held the following in respect of the affidavit
said to have protectable goodwill;
● Argued the packaging is “vastly different” and the ”packaging architecture” is not unique in the skincare industry, locally and abroad; and
● Argued that L’Oréal was seeking to “stifle legitimate competition” via the ARB’ s processes
THE ARB’S FINDINGS
The ARB held that:
● The ARB will consider a matter and issue a ruling for the benefit of its members even if the company Nutriwomen is not a member;
● The tests under Clauses 8 and 9 of Section II are not the same as the test for passing off, although passing off decisions may be useful; and
● In this case there was a breach of Clauses 8 and 9 of Section II, relating to exploitation of advertising goodwill and imitation
On appeal, the Advertising Appeals Committee (AAC) made the following findings:
● Jurisdiction: The ARB is entitled to consider complaints involving a party which is not a party to the ARB this has been confirmed by the Supreme Court of Appeal (SCA)
● Similarities between the marks: The CERAVE and
submitted by the design agency:
● “It appears that if tasked with a revamp of a product range one of the issues which an agency would begin with would be to gain some market knowledge of competitor products Had New Media done so, they would have noticed that what they had in mind for DERMACARE was substantially similar to the CERAVE range Had this been done, one would imagine that they would immediately have flagged the similarities for their client and suggested something different; ● “In the present case, even if New Media did not undertake this exercise (which is hard to believe for an agency with 21 years of extensive experience in the industry), once they had presented their proposal to Nutriwomen, one would have expected Nutriwomen to spot the similarities and ask New Media to amend their proposal’ and ● “None of this took place according to the affidavit and according to the oral submissions on behalf of Nutriwomen ”
THE OUTCOME
The AAC agreed with the Directorate that there had been a copying of get-ups and exploitation of goodwill, and therefore a contravention of Clauses 8 and 9 of Section II of the code
The ruling of the AAC is an important reminder to brand owners that look-a-like products can, and should, be addressed based on the reputation in product packaging separately from the brand name of a product This was evident in the social media evidence presented by L’Oréal where consumers commented on the similarities between the respective packaging despite different brand names being used Brand owners should also consider a strategy of protecting their product packaging through trademark filings
/123RF OLEGDUDKO