State’s lack of capacity spurs private sector contributions
• It plays a widespread role in the delivery of public services and its involvement is expected to grow
Pippa Reyburn, Yana van Leeve & Vivienne Jonker ENS
Private sector contributions to government initiatives are on the rise in SA
The future of public-private collaboration to deliver on the government’ s constitutional mandate will certainly be interesting, especially in the context of the recently enacted Public Procurement Act, and in a government of national unity where views on increasing private-sector participation might not always align Notwithstanding, private sector participation in the performance of public functions is not new, and to meaningfully harness the expertise of the private
sector requires a strong and capable state
The government is constitutionally mandated to deliver services, and it is legally permitted to do so either directly or in partnership with private sector companies Let’ s take a look at a simple example: a municipality is obliged to fix municipal roads within its jurisdiction It can either deploy its employees, equipment and materials, or it can enter into a contract with a
TO CONTRACT WITH THE PRIVATE SECTOR, THE GOVERNMENT HAS TO NAVIGATE A COMPLEX LEGAL FRAMEWORK
private sector company to complete the work Over the past 30 years, the government has increasingly relied on private sector companies to deliver services on its behalf, be that installing bulk infrastructure such as roads and sewerage systems, paying social grants, running prisons and delivering textbooks to schools, or designing and maintaining online solutions for the renewal of a driver’ s licence or a passport application
The opportunities are too numerous to list The private sector plays a widespread role in the delivery of public services and its involvement is expected to grow
To contract with the private sector, the government has to navigate a complex legal framework while mak-
ing use of established contracting arrangements
For a municipality contracting a private sector company, the endeavour might look something like this: the municipality runs a procurement process to award a tender to a contractor, which must comply with requirements in the Local Government: Municipal Finance Management Act, the Municipal Supply Chain Management Regulations, the Preferential Procurement Policy Framework Act, the Promotion of Administrative Justice Act, by-laws, National Treasury circulars and, in some cases, pursuant to public consultation
If the contract involves the company delivering a service
directly to a community, then before the contract can be concluded, the municipality is legally required to conduct a feasibility study, consult with relevant stakeholders and undertake a public participation process
COMPLEXITY
Further, if the contract imposes financial obligations on the municipality for more than three years, the municipality usually needs to obtain municipal council approval, invite public comments on the proposed contract and solicit recommendations from other government departments This all applies to relatively standard supply contracts, with a host of additional rules applying to more
complex “public-private partnership” contracts
The complexity and arduousness of conventional government contracting have spurred the proliferation of innovative contractual arrangements between the government and the private sector These include unofficial partnerships, memoranda of understanding and donation agreements outside of the more complex requirements
Well-known examples include various funds established by businesses to support government and personnel secondments from the private sector, including from nongovernmental
SHARING THE LOAD
BUSINESS LAW & TAX
Commission workers and minimum wage
• Act mandates workers be paid for minimum of four hours, even if they work less hours on a given day
Dhevarsha Ramjettan, Siya Ngcamu & Eugene Chaphi Webber Wentzel
Given the adjustment to the national minimum wage taking effect on March 1 2025, we consider the remuneration of workers on bases other than hours worked, such as commission-based remuneration, and the challenges presented in complying with the National Minimum Wage Act 9 of 2018 (NMWA) under these arrangements
The employment & labour minister has determined the adjustment to the national minimum wage (minimum wage) in accordance with the NMWA The minimum wage now stands at R28 79 per ordinary hour worked and R15 83 per hour for workers employed under an expanded public works programme Prior to this adjustment, the minimum wage was R27 58 per ordinary hour worked and R15 16 for workers in expanded public works programmes
The NMWA, which came into effect in 2019, requires employers to pay the minimum wage to every worker except members of the South African National Defence Force, the National Intelligence Agency and the South African Secret Service
The minimum wage constitutes a term and condition of a worker’ s contract unless a more favourable wage is
CHALLENGES ARISE WHEN DETERMINING REMUNERATION NOT BASED ON HOURS WORKED, SUCH AS OUTPUT OR SALES TARGETS
agreed on Workers and employers cannot waive the payment of the minimum wage, as it takes precedence over any contrary provision in a contract, collective agreement, sectoral determination or law, except a law amending the NMWA
A minimum wage for workers not paid by the hour
Determining whether an employer complies with the obligation to pay the minimum wage is straightforward when workers have fixed working hours or a fixed wage The wage is calculated based on hours worked, with a minimum of four hours paid daily even if fewer hours are worked The situation becomes more complex for commission-based workers Commission-based remuneration, common in sales and market networking industries, involves workers earning income through selling products or services on behalf of a business This remuneration model is prevalent in cosmetic companies and financial and insurance institutions Commission earners fall within the definition of “worker” in the NMWA and are thus entitled to be paid the minimum wage However, challenges arise when determining compliance with the NMWA for remuneration not based on hours worked, such as output or sales targets
Results-based remuneration structures are attractive for workers seeking to supplement income or work outside traditional working environments, such as caregivers or stay-at-home parents Employers also favour such remuneration structures for flexible, independent tasks where pay is directly linked to measurable outputs
CALCULATIONS
In Atlas Finance (Pty) Ltd v Commission for Conciliation, Mediation and Arbitration and Others the labour court had to determine the application of the NMWA to commission earners who worked discernible hours and received a basic salary The court held that commission workers, regardless of how their earnings are structured, must receive the minimum wage within their “ pay reference period” For example, a commission worker on a purely commission-based income, working an eighthour shift, five days a week, must be paid at least R1,151 60 a week (calculate as R28 79 x eight hours x five days)
Section 5(2) of the NMWA stipulates that any worker paid on a basis other than the number of hours worked must still receive the minimum wage for the ordinary hours of work permitted in terms of the Basic Conditions of Employment Act 75 of 1997 (BCEA) This is subject to section 9A of the BCEA, which mandates that workers be paid for a minimum of four hours, even if they work less hours on a given day
This implies that if a worker earns based on sales volume but makes no sales in a day, they must still receive at least four hours’ worth of the minimum wage
Where workers sell products or services for multiple employers and their working hours are neither monitored nor strictly stipulated in commission agreements, commission earners may be unable to prove they worked for a specific employer during a particular period, except through recorded sales or specified outputs for that employer
If no sales or outputs are recorded, employers may
argue they have no obligation to remunerate the worker in terms of the NMWA, given the results-based method of calculation governing the working arrangement Given commission structures and working arrangements vary across industries, there is no one-size-fits all approach for commission earners remunerated on a basis other than hours worked Employers are encouraged to review their remuneration structures to ensure compliance with the NMWA, particularly where no justifiable reason exists to depart from its objectives
CONSEQUENCES
Noncompliance with the NMWA may have financial consequences for employers, including fines for failing to adhere to compliance orders issued by the employment & labour department Additionally, if workers successfully challenge an employer’ s failure to comply with the NMWA, the employer may be ordered to pay workers the minimum wage retrospectively
State’ s lack of capacity spurs private sector contributions
CONTINUED FROM PAGE 1
organisations, to bring muchneeded capacity to departments holding critical mandates
In such arrangements, the government might not procure private sector companies as such Instead, government and the private sector collaborate in ad hoc, flexible, short-term ventures, steering clear of the public procurement regulatory regime to drive essential strategic initiatives in the public interest However, the success of these arrangements is contingent on private-sector funding being available for the provision of those services
RELIANCE ON THE PRIVATE SECTOR
The most widely cited impetus for the private sector s increased participation in
service delivery is the government’ s lack of capacity and resources
The apparent dearth in our civil service of skills, technical proficiency, human resources management and effective leadership together with the financial burden of state institutions by economic conditions, corruption, financial mismanagement and shallow revenue streams has resulted in the status quo of government s poor or nondelivery
But of course, these challenges have arisen in the context of increasing reliance on the private sector, raising important questions about how to improve the government s regulatory and technical capacity to effectively oversee and manage performance by private providers
Facilitating more private sector participation without addressing the root causes of
poor or nondelivery is likely to exacerbate the challenges experienced on the ground
Taking over the state s functions, including even its most routine tasks, leaves the state less equipped to do its job, and increasingly dependent on the private sector, in the future Piecemeal and fragmented support from the private sector, akin to charity work, depends on the goodwill and the politics of the time, making it a particularly unsustainable bloodline in service delivery
Moreover, shifting the performance of public functions to the private sector raises challenges with respect to legitimacy, mandate, accountability and enforcement, especially when things fail
The Constitution imposes obligations on the government; the government is squarely accountable for ful-
filling its obligations, and these can accordingly be judicially enforced Handing over government functions to private companies can result in a mismatch between the entity mandated to do the job, and the entity doing the job
This, in turn, can create an accountability vacuum and public misconception about who is in charge
All of which is a recipe for delegitimising the (democratically elected) state
Similarly, applying innovative contracting arrangements through donations to
PRIVATISATION IS UNLIKELY THE PANACEA TO SA’S SERVICE DELIVERY PROBLEMS, AS MANY BELIEVE IT TO BE
the state risks overstepping the accountability mechanisms purposively built into the legal framework: the legislated public participation, consultation and approval processes Agreements are concluded swiftly and responsively but without the same degree of transparency
An informal interface between government and the private sector opens opportunities for abuse, mismanagement, corruption and unfairness
The avoidance of our legal machinery, because it s simply too difficult to use, defeats its very purpose: to regulate the relationships between the public and private sectors in accordance with systems that are fair, competitive, equitable and cost-effective
Privatisation is unlikely the panacea to SA s service delivery problems, as many believe it to be It s no given
that the job will get done well, or at all, and without wasteful expenditure or corruption, simply by giving it to a private sector company, instead of government, to do
The flooding of our courts with cases of irregularities in concluding government contracts and subsequent nonperformance by private service providers is evidence enough
The substandard delivery of healthcare, electricity, water and rail services by private companies in the US and the UK are also glaring precedents not to be ignored
An age-old concern also remains prevalent: that the private sector s increased participation in service delivery has the power to move government decisions or strategies to serve corporate incentives, as opposed to the public interest in accessing basic services
BUSINESS LAW & TAX
Facts: check, check and check again
• Ignorance of the risks of AI is not an excuse for failing to comply with ethical and professional duties
Aslam Moosajee & Zameer Omar ENS
With the rapid development and implementation of artificial intelligence (AI) tools across various sectors, the dangers of relying on AI without verifying the correctness of the AIgenerated information was highlighted in the recent case of Mavundla v MEC: Department of Co-Operative Government and Traditional Affairs KZN and Others
In this case, a candidate attorney drafted the applicant’ s supplementary notice of application for leave to appeal Several references to case authorities in support of the submissions made in respect of the grounds of appeal were contained in the notice The candidate attorney was unsupervised when drafting the notice
The applicant’ s grounds of appeal were based on the judge’ s alleged incorrect findings in respect of joinder and service It turned out that most of the cases cited in the notice did not exist
Most of the cases could not be found in the South African Law Reports, nor on the South African Legal Information Institute’ s website
The judge requested two
researchers employed by the court to provide the cited cases Of the nine cases cited, only two were found to exist, with the citation of one of the cases being incorrect
The judge wanted to afford the applicant’ s counsel an opportunity to provide the authorities she relied on and requested the authorities to be provided in an email on September 18 2024 Counsel for the parties then appeared before the judge on September 20 2024 and the applicant’ s counsel applied for an adjournment as she was
A LEGAL PRACTITIONER IS RESPONSIBLE FOR THE VERIFICATION OF THE INFORMATION USED IN COURT
unable to source the cases
The candidate attorney then appeared before the judge and informed the judge that she obtained the cases from the law journals by doing research through the Unisa portal
The matter stood down, the judge afforded the applicant’ s counsel and the candidate attorney another opportunity to provide the relevant cases On resumption, the
proprietor of the applicant’ s firm of attorneys appeared before the judge The attorney explained that he was unable to draw the cases from the high court’ s library as the librarian requested him to pay for copies of the cases
In a final attempt to afford the applicant’ s counsel and attorneys the opportunity to present the authorities, the judge adjourned the matter to September 25 2024 On the return date, the applicant’ s attorney appeared before the judge and explained that he was unable to present the authorities In terms of the Code of Conduct for All Legal Practitioners, Candidate Legal Practitioners and Juristic Entities, legal practitioners bear the duty to avoid misleading a court in respect of facts, questions of law and what is in the papers before a court A judge is entitled to take a legal practitioner at their word Where authorities are cited, there is a tacit representation that no contradictory authority is known to exist The court expanded on this principle to include that a court should be able to assume and rely on a practitioner s tacit representation that the authorities cited and relied on do exist
Not only do admitted practitioners bear the duty to always act with honesty, candour and competence
towards a court, but this duty also extends to candidate legal practitioners Given that most of the cases cited in the notice did not exist, there were doubts the candidate attorney’ s contention she perused the law journals was truthful This raised questions about the candidate attorney ’ s conduct, which is for the Legal Practice Council to investigate and consider
The court aligned with the works of Prof M van Eck and the view that the duty to act honestly and with integrity results in the duty to not use false information The duty to not mislead the court deliberately and misleading through mistake, ignorance and carelessness should differ
However, all types of misleading are serious breaches of the professional conduct expected of a legal practitioner Ignorance of the risks of AI is not an excuse for failing to comply with the ethical and professional duties of the practitioner
Prof van Eck believes legal practitioners are required to research the law and present an honest account of the law Presenting nonexistent case law to the court does not con-
stitute an honest account of the law The court concurred
The code provides that legal practitioners are to exercise proper control over their staff Prof van Eck’ s view is that this includes the verification of the accuracy and correctness of any information sourced from AI systems by staff, including candidate legal practitioners The court agreed with this view
A legal practitioner is responsible for the verification of the information used in court, regardless of the
LEGAL PRACTITIONERS ARE REQUIRED TO RESEARCH THE LAW AND PRESENT AN HONEST ACCOUNT OF THE LAW FACT
source of the information
The failure to do so may result in a breach of ethical and professional duties, ultimately leading to sanctions and disciplinary action against the practitioner
Following a brief experi-
ment, which revolved around entering one of the nonexistent cases cited in the notice into ChatGPT, the AI tool confirmed its existence despite the case not existing This confirmed the unreliability of using ChatGPT as a source of information and legal research In the words of the court: “Reliance on AI technologies when doing legal research is irresponsible and downright unprofessional” The applicant’ s counsel ought to have checked the authorities cited in the notice The attorney ought to have checked the candidate attorney ’ s work; the notice would then never have made it beyond the draft stage This did not occur
Accordingly, a costs de bonis propriis (personal cost order) order against the applicant’ s attorneys in respect of the appearances to verify the existence of the case law was made The judge requested the registrar to send a copy of the judgment to the Legal Practice Council for its attention and further action
The application for leave to appeal was dismissed with costs on scale C
Employment equity sector targets: what to expect
Anastasia Vatalidis, Kerry Fredericks & Thembelihle Tshabalala Werksmans
On February 17 2025, the department of employment & labour held a virtual meeting where various stakeholders and industry players met to discuss and engage on, inter alia, the employment equity sector targets for the Professional, Scientific and Technical Sector
This meeting comes off the back of the Employment Equity Amendment Act 4 of 2022 (EEAA) which came into effect on January 1 2025 and the Draft Regulations on Proposed Sectoral Numerical Targets published by the employment & labour department on February 1 2024 The department, inter alia, set out:
● The criteria which designated employers would need to comply with in order to be issued with a compliance certificate for the purposes of employment equity in accordance with section 53 of the Employment Equity Act 55 of 1998 (which is not yet in effect);
● Examples of what could be justifiable reasons/grounds which the department would consider where a designated employer fails to comply with its employment equity targets, when assessing whether or not to issue the designated employer with a compliance certificate notwithstanding their noncompliance;
● The national economic active population (EAP) as well as the EAP for each province, as compared to the proposed employment equity sector targets (as published in the draft regulations); and
● The way forward in the implementation process of the EEAA and the regulations thereto
In relation to the way forward, the department had indicated it anticipated that the sector stakeholder consultations on the final sectoral employment equity targets would be finalised by the end of February Thereafter, the department intends to publish two sets of Employment Equity Regulations by the end of March, these being:
● The General Administrative Regulations which will contain the reporting forms,
employment equity plan templates, enforcement tools and the employment equity compliance certificate template; and
● The regulations on the five-year sector employment equity targets
INTERNAL TRAINING
In April 2025, the department will conduct internal training for the employment equity labour inspectors on the EEAA, the regulations as well as the employment equity system to be used when assessing a designated employer s compliance for
the purposes of employment equity
Pending the publication of the two sets of employment equity regulations, we cannot confirm the department s way forward will materialise However, with the imminent enactment of the EEAA and the regulations, designated employers are encouraged to monitor the latest developments as they arise and to ensure compliance with their obligations for the purposes of employment equity or risk substantial financial sanctions and/or not being issued with a compliance certificate
/123RF PESHKOVA
BUSINESS LAW & TAX
Key amendments now in force
Matthew Morrison, Madison Liebmann, Daniel Torr & Sinovuyo Damane ENS
The President has proclaimed in the Government Gazette No 51837 that certain sections of the Companies Amendment Act No 16 of 2024 and the entirety of the Companies Second Amendment Act No 17 of 2024 are now effective
The changes took effect on the gazette’ s publication on December 27 2024
Certain of the key amendments from the Amendment Act (the others being more administrative) that are now in force include, inter alia, the following:
• Definition of ‘securities’ one of the changes to Amendment Act that has taken effect THE TIME BAR TO DECLARE A DIRECTOR DELINQUENT HAS BEEN EXTENDED FROM 24 TO 60 MONTHS
● Section 1: The definition of “securities” which limits the definition of “securities” to shares and debentures and now excludes the wording “ or other instruments” ;
● Section 16: A notice of amendment to the MOI will take effect 10 business days after receipt of the notice, if CIPC, after the expiry of the 10 business days, has not endorsed the notice or has failed to deliver a rejection of the notice to the company with reasons, or at a later date as set out in the notice;
● Section 45: The provisions of section 45 which relates to financial assistance no longer apply to the giving by a company of financial assistance to or for the benefit of its sub-
sidiaries;
● Section 48: Share buybacks are subject to a special resolution unless the shares are being acquired as a result of a pro-rata offer made by the company to all the company ’ s shareholders or a particular class thereof, or the acquisition of shares is as a result of transactions effected on a recognised stock exchange;
Section 61: Public companies must include a presentation of the social and ethics committee (SEC) report, the remuneration report and the appointment of an SEC at their AGMs;
nonexecutive director and who must have been a nonexecutive director within the previous three financial years;
● Section 95: The definition of an employee share scheme has been amended to include the acquisition of shares by means of the purchase of shares in a company; and
● Section 135: Any amounts due by a company under business rescue to the landlord in terms of a contract (ie generally a lease) where the landlord has paid for public utility services, rates and taxes, electricity and water, sanitation and sewer charges of the company during business rescue proceedings are now seen as post-commencement financing
IN GOOD COMPANY
● Section 72(7A): An SEC must comprise not less than three members provided that in the case of public and state-owned companies, the majority of the members must be nonexecutive directors and must have been nonexecutive directors during the previous three financial years, and in the case of any other company, the members must consist of not less than three directors or prescribed officers, at least one of whom must be a
We note that two of the more substantive amendments from the Amendment Act are not yet in force namely, the amendments to sections 26 and 30 which provide nonbeneficial interest holders with the right to inspect and copy certain company records including companies’ annual financial statements (provided that the relevant company is above the prescribed public interest score), as well as the newly inserted sections 30A and 30B which oblige stateowned and public companies to prepare and present a remuneration policy and remuneration report for shareholder approval, as well as the so-called “two-strike”
rule relating to barring of the nonexecutive Remco members following two successive failed votes on the remuneration report
Other amendments not yet in force are:
TWO OF THE MORE SUBSTANTIVE AMENDMENTS ARE NOT YET IN FORCE NAMELY, THE AMENDMENTS TO SECTIONS 26 AND 30
CONSUMER BILLS
● Section 38A, which allows a company or any person who holds an interest in a company to make an application to the court to make an order validating an invalid creation, allotment or issue of shares, after satisfying itself that it is just and equitable to do so; and
● Section 118, which grants the Takeover Regulation Panel jurisdiction over private companies that have 10 or more shareholders with direct or indirect shareholding in the company and meet or exceed the financial threshold of annual turnover or asset value
We need a court that can move it, move it
Consumers of legislation, which we all are, are being consumed by the legislation we are required to comply with Acts of parliament are supplemented by hard law in the form of treaties, regulation, directives, standards, bylaws, proclamations, government notices and other regulatory instruments with the force of law In addition, and because of the complexity of laws and sometimes bad drafting, there is an ever-growing expanse of what is euphemistically called soft law This consists of recommendations, guidance, guidelines, advice, interpretation rulings and even talks given at conferences or webinars organised by regulators
PAT R I C K B R AC H E R
Financial conduct is frequently required by statute to be conducted according to accounting standards such as the International Financial Reporting Standards (IFRS) which are said to be the authoritative pronouncements of the International Accounting Standards Board
A recent tax judgment held that the court was not equipped to determine the proper application of IFRS in the absence of expert
evidence The IFRS rules were described as foreign law requiring proof by way of expert evidence If a clever judge in the tax court needs expert evidence as to what laws mean, how about the rest of us?
The trouble with laws is that they are not like contracts You cannot get a quick and efficient outcome as to what they mean by mediation, adjudication or arbitration Laws can only be interpreted by the courts and government cannot arbitrate over their meaning This has a chilling effect
Faced with regulatory action, a person has to either incur the considerable costs and wasted years in challenging the law in question or submit to paying a penalty with consequent reputational harm The
choice is usually to pay and move on
There is no shortcut to getting a court-endorsed outcome regarding laws which are alleged to be unconstitutional or otherwise contrary to the rule of law
The complexity of major legislation leads to the public taking unnecessarily antagonistic stances while the law is being interpreted
Very few people who comment on the Expropriation Act, the National Health Insurance Act or the Basic Education Laws Amendment Act have much idea what the legislation means or implies
Even those who do have a clear understanding of the proposed legislation are powerless to do anything about it until the matter reaches the Constitutional
Court six or seven years later
In these instances, we need a Constitutional Court that grapples with the issues as soon as possible Where socially important statutes are generating more heat than light, the Constitutional Court needs to be able to take immediate jurisdiction over the interpretation of those laws and to get to a decision as soon as possible
Anybody with anything useful to say will have the right to make presentations to the court It should not be
DELAYS AFFECT EVERYONE IN THE COUNTRY AND NO-ONE GAINS FROM UNCERTAINTY
In terms of the Companies Second Amendment Act, the time bar to declare a director delinquent has been extended from 24 to 60 months and, furthermore, the court now has the discretion to extend the period in respect of which proceedings to recover any loss, damages or costs may be commenced, which is currently within three years after the act or omission that gave rise to the liability
up to individual litigants to ask for direct access which, if refused, only serves to further delay the interpretation of laws such as those mentioned Delays affect everyone in the country because of the polarisation controversial laws create for as long as there is no final judgment No-one gains from uncertainty A Constitutional Court Justice recently noted the indispensable role the courts play in advancing social justice, but said the legal system has limitations in achieving systemic change Here is one way that justice which is not delayed can be justice achieved
● Patrick Bracher (@PBracher1) is a director at Norton Rose Fulbright
BUSINESS LAW & TAX
Understanding the crucial role of court rules
• Various cases highlight the
need for defendants to deliver their notice of intention to defend timeously
Wandile Ndabambi & Matthew Pistorius ENS
In the complex world of litigation, even a minor misstep can jeopardise a case Understanding and strategically leveraging court rules is not just prudent for corporate clients, it is essential Rule 19 of the Uniform Rules of the High Court outlines the timeframes for defendants to deliver their notice of intention to defend in action proceedings commenced by summons Typically, defendants have 10 court days under Rule 19(1) However, Rule 19(2) extends this to 20 court days for certain defendants, including government ministers, provincial premiers and the state Under section 24(a) of the Superior Courts Act 10 of 2013 (act), those defendants are afforded one month to deliver their notice of intention to defend
Service of the notice of intention to defend may be effected by way of email under Rule 4A(1)(c), where the plaintiff has provided an email address, in terms of Rule 17(3) As noted in Van Loggerenberg’ s commentary on the rules, if an attorney’ s email address is not provided or is unavailable, the only other address permitted by the subrule for receiving of notices by and service of documents is the attorney s physical address, which has to be within 25km of the reg-
istrar’ s office Alternatively, the attorney must appoint a correspondent attorney at the court’ s seat to receive documents Under Rule 19(5), a notice of intention to defend may be delivered out of time if it is before default judgment has been granted If a plaintiff has applied for default judgment but it has not been granted yet when the notice of intention to defend is delivered, then the plaintiff shall be entitled to the wasted costs of the application for default judgment
PRE-TRIAL PROCEDURES ARE VITAL TO ENSURE ... JUSTICE EVEN TO THE MOST INDIFFERENT OF PARTIES
The issue surrounding the late delivery of a notice of intention to defend, especially when default judgment has been applied for, was the main subject in the 2023 decision in Khumalo v Road Accident Fund The Johannesburg high court highlighted a pertinent issue facing the courts a party who fails to deliver a notice of intention to defend timeously and largely ignores any ongoing court proceedings normally rocks up when the litigation party is almost at its tail end, and this is during the default judgment
application phase”
Kgomongwe AJ highlights, however, that the “courtsanctioned pre-trial procedures are vital to ensure fairness and justice even to the most indifferent of parties” While the procedures are undoubtedly vital to ensure fairness and justice, the risk of an abuse of said procedures remains a critical issue to guard against In Standard Credit Corporation Ltd v Bester, the court held that an abuse of process occurs when a court process “is used by a litigant for a purpose for which it was not designed or intended, to the prejudice or potential prejudice to the other party to the proceedings”
In the 2024 decision of Nathram v Road Accident Fund, the Pretoria high court considered whether to set aside a notice of intention to defend filed out of time by the Road Accident Fund Summons was issued on September 17 2020, with the deadline to deliver a notice of intention to defend falling on October 9 2020 This deadline was missed, and on the eve of the date for the hearing of Nathram s default judgment application, the Road Accident Fund delivered a notice of intention to defend Davis J explains Rule 19(5) envisages that prejudice occasioned by the late delivery of a notice of intention to defend can be rectified through a costs order However, Davis J highlighted the
TO THE LETTER OF THE LAW
disadvantage to a plaintiff who sues for damages as it delays the determination of the compensation due to the plaintiff This is exacerbated by already heavily congested court rolls, especially in Gauteng Davis J ultimately held that the belated delivery of the notice of intention to defend, nearly four years after the deadline, amounted to an abuse of process and was set aside
ABUSE OF PROCESS
As recently as November 2024, in the matter of Mattheus v Road Accident Fund, the Pretoria high court once again faced the issue of a notice of intention to defend being delivered the day before a default judgment application was to be heard In this matter, the summons was served on April 17 2023, and the notice of intention to defend was electronically served on July 2 2024, some 14 months out of time Apart from the delay in delivering the notice of intention to defend, it was argued that it was not delivered per the rules The court held that, despite the defendant’ s contention to the contrary, Rule 19(3)(c) was not complied with, as the plaintiff had not provided written consent that subsequent documents and notices may be exchanged via email This, in turn, resulted in the defendant not having complied with Rule 19(5)
Kruger AJ went further, holding that the defendant failed to comply with the rules and used the rules for “ulterior motives” and “ as an abuse of the process ” The notice of intention to defend was therefore set aside
As aptly observed by Kruger AJ in Mattheus, “there are various remedies available for all litigants in terms of the rules of court, which have been established to provide certainty, reliability, fairness and guidance to litigants in the process of litigation” Rule 19 is essential in ensuring fairness and justice in the court process However, the courts will not ignore non-
SERVICE OF THE NOTICE ... MUST BE EFFECTED AT THE ADDRESS AS PROVIDED FOR IN THE SUMMONS SERVED UPON THEM
compliance with the rules when the rules are utilised in a manner that amounts to an abuse of process
Defendants in civil matters who wish to defend a claim against them must ensure their notice of intention to defend is delivered within the period prescribed under Rule 19(1), alternatively Rule 19(2) and section 24(a) of
the act, to prevent potential challenges further along in the litigation process Should the prescribed periods for delivery of a notice of intention to defend expire, and the defendant later seeks to deliver a notice of intention to defend, Rule 19(5) makes provision for costs to be awarded against the defendant to the plaintiff, where default judgment has been applied for, but not yet granted Service of the notice of intention to defend must be effected at the address as provided for in the summons served upon them Rule 4A(1)(c) permits the service of documents and notices via email where the other party has provided an email address However, where an email address is not provided, service is to be effected at the physical address provided for in the summons Defendants are reminded under Rule 19(3)(c) absent the written consent of the plaintiff to the exchange or service by both parties of subsequent documents and notices via email, service in terms of Rule 4A(1)(c) is not permitted where an email address is not provided by the other party As outlined in Mattheus above, doing so may lead to the court deeming that a notice of intention to defend has not been delivered, and a defendant then faces the risk of a default judgment being granted against them
New employment equity targets reshape compliance
Jonathan Goldberg & John Botha Global Business Solutions
In a significant development for South African businesses, the intersection of broadbased black economic empowerment (BBBEE) and the Employment Equity Amendment Act (EEAA) is creating a more stringent compliance framework for corporate SA Industry experts anticipate closer alignment between
these two transformative pieces of legislation through the Employment Equity Certificate of Compliance
The Employment Equity Certificate, issued by the department of employment & labour, is emerging as a crucial link between EEAA s new sectoral targets and BBBEE s management control requirements To obtain this certificate, employers must meet several key criteria, including achieving prescribed sectoral targets
across 18 sectors or providing valid justification for any shortfall using one of seven accepted reasons
Additional requirements for certification include maintaining a clean record regarding discrimination and harassment cases at the CCMA or courts for the 12 months preceding certification, adherence to national minimum wage standards and successful submission of EEA2 and EEA4 forms
While the Employment
Equity Certificate is not currently mandatory under BEE codes, industry analysts expect the BEE Commission and Employment Equity Commission to establish a formal protocol making it a prerequisite for maintaining BEE and EE statuses This development would mirror existing BEE requirements, such as the mandatory submission of workplace skills plans and annual training reports for skills development scoring
The convergence of these regulatory frameworks underscores their shared objective: creating an equitable socioeconomic ecosystem that ensures fair distribution of resources across racial, gender and disability demographics
Corporate governance experts emphasise that employers must now take a more strategic approach to their employment practices
Organisations need to ensure their employee value
proposition, corporate culture and strategic-planning are deliberately aligned with these requirements if they hope to meet the ministerial sectoral targets, notes a leading compliance consultant As South African businesses navigate this evolving regulatory landscape, the integration of BEE and EE requirements signals a more comprehensive approach to workplace transformation and economic empowerment
/123RF ZANNAGAP
BUSINESS LAW & TAX
Is the claim of ‘legal privilege’ sufficient?
• Saga of Steinhoff and forensic investigation report highlights access refusal versus public interest
Nina Greyling Nortons Inc
The Supreme Court of Appeal (SCA) recently handed down a judgment that should serve as an eye-opener for companies appointing auditing firms to investigate potential fraud or accounting irregularities and assuming that they will be able to claim legal privilege over those reports and, therefore, that they are not disclosable
In 2017, Steinhoff International Holdings NV (Steinhoff) appointed PricewaterhouseCoopers Advisory Services (PWC) to conduct a forensic investigation into potential accounting irregularities PWC produced a report setting out the findings of its investigation Steinhoff then published a summary of the report
Following the publication of the summary, numerous media houses requested access to the full PWC report in terms of the Promotion of Access to Information Act (Paia), arguing that the report was crucial to the right to freedom of expression of the media and that its disclosure
was in the public’ s interest Steinhoff’ s attorneys argued the PWC report was legally privileged, which meant that in terms of section 67 of Paia, Steinhoff was entitled to refuse to provide access to the report
On October 23 2019, the media houses launched an application in the high court
NUMEROUS MEDIA HOUSES ARGUED THE REPORT WAS CRUCIAL TO THE RIGHT TO FREEDOM OF EXPRESSION OF THE MEDIA
for an order setting aside Steinhoff’ s decision to refuse to provide them with access to the PWC report
The high court held that legal privilege was claimed without providing the underlying facts to enable the court to assess the claim The high court also held that there were no facts to support the assertion litigation was being contemplated when PWC was appointed As such, the
In Body Corporate The Straight v Katisi (Case number 2023/031774 –unreported), Windell J in the High Court of SA (Gauteng Local Division, Johannesburg) handed down a judgment in January 2025 which offers some relief to beleaguered body corporates
Windell J held that where an owner of a sectional title unit fails to pay the body corporate the amount levied by the body corporate in respect of electricity consumed by the owner and where such amount due in respect of electricity is undisputed the body corporate is entitled to cut off the supply of electricity to the relevant unit until such time as the amount outstanding by the owner in respect of
electricity is paid to the body corporate
The judge distinguished this case from Lion Ridge Body Corporate v Alexander 2022 JDR 3057 (GJ) and Joseph v City of Johannesburg 2010 (4) SA 55 CC, and held that for the reason a body corporate is obliged to pay the electricity supplier (in this case, Eskom) whether or not it has received from its members payments due by such
high court held that Steinhoff had failed to establish the report was privileged Steinhoff was unhappy with this outcome and appealed the high court’ s decision to the SCA
The SCA highlighted that Paia was enacted to give effect to the right to access to information in section 32 of the Constitution, and “the disclosure of information is the rule and exemption from disclosure is the exception” Any refusal of access to information is a limitation of the section 32 Constitutional right
The SCA held that there are two requirements for litigation privilege to exist: (a) The document must have been obtained or brought into existence for the purpose of a litigant’ s submission to its legal adviser for legal advice; and (b) Litigation must have been pending or contemplated as being likely at the time
The SCA noted that the public statements by Steinhoff regarding the appointment of PWC made no mention of the involvement of Steinhoff’ s attorneys To the contrary, they indicated the purpose of the report was to allow Steinhoff to publish its
UNDER SCRUTINY
2017 annual financial statements The SCA highlighted that the question as to who appointed PWC was not important, but rather whether the PWC report was produced for purposes of legal advice or in contemplation of litigation
The mere fact that a law firm has been involved in the appointment of PWC, or that the engagement letter is headed “privileged” , is not on its own sufficient
The SCA referred to a “dominant purpose test” and concluded that a document created with “the dominant purpose of its author, or of the person or authority under whose direction it was created, of using it to obtain legal advice, or in the conduct or
COMPANIES MUST BE CAUTIOUS ABOUT PUBLISHING BRIEF DOCUMENTS RELATED TO THE MAIN FORENSIC INVESTIGATIONS
IN YOUR COURT
members in respect of electricity consumed in their respective units, there exists a tension between competing issues on the one hand the constitutional rights of the owner as set out in the provisions of section 26 and 10 of the Constitution respectively and on the other hand the obligation of the body corporate to pay its debts and to keep the lights on for all members of the sectional title scheme
Body corporates are nonprofit companies and are prohibited from deriving income from any resource other than levies imposed lawfully by the trustees on the members
Windell J held that it could not be the intention of the Constitution to protect an
admitted delinquent payer to the detriment of the body corporate and at the expense of all other owners
The court went on to hold that prior to the disconnection of electricity the body corporate must exercise procedural fairness in that proper notice must be given to end users which might from time to time one supposes include tenants
In this case the body corporate concerned in its notice of motion included the request for an order allowing disconnection
Windell J noted this with an element of approval but did not state specifically that a court application for such an order is required prior to the disconnection of electricity by a body corporate
existing or contemplated adversarial litigation, is privileged and shielded from inspection and production” It was concluded by the SCA that this was not the purpose for which the PWC report was prepared and, therefore, its disclosure was justified
It is also crucial for companies to be cautious about publishing brief documents related to the main forensic investigations, as this could result in the company waiving its privilege over the full forensic report The SCA held that this is exactly what Steinhoff did when it published its 11-page overview document relating to the PWC report
Another curveball for companies is section 70 of Paia This section effectively means that even if a ground of refusal in terms of section 67 is applicable such as privilege a document must nonetheless be disclosed if the public interest in the disclosure of the document clearly outweighs the harm contemplated in the provision in question
This approach is consistent with the common law principle that privilege cannot be invoked to commit or cover up fraud or crime As such, the SCA held that the public’ s interest in the disclosure of the PWC report outweighed the harm which would have been suffered by Steinhoff
Another important statement emanating from the SCA’ s judgment is: “The public interest, more specifically, the right of South African society at large, to know the facts about the Steinhoff scandal goes beyond the narrow interest of Steinhoff, and is best served by exposing the nation’ s biggest corporate scandal through complete transparency, to avoid recurrence ” It is, therefore, important to ensure that where forensic exercises are performed for the purpose of litigation or obtaining legal advice that: (i) Attorneys are appointed from the outset, and (ii) The company avoids making detailed public statements that could constitute a waiver of privilege
Notwithstanding the ratio of the judgment is compelling and I would argue that it establishes a precedent that where an amount is owing to a body corporate at least in respect of electricity and such debt is conceded by the delinquent owner and due notice has been given by the body corporate of the intention of the body corporate to cut off the electricity supplied to the relevant unit that the body corporate is now lawfully
entitled to take such action
The court did not discuss the issue of nonpayment for other services rendered through the body corporate to members of a sectional title scheme
Body corporates should perhaps use this judgment cautiously at least for the next while as it is not improbable that a higher court in due course shall be placed in a position to view similar circumstances At the very least a body corporate wishing to take advantage of the judgment should consult with its attorney and make sure that the circumstances match those of the judgment
● Peter Blanckenberg is a Director at Blanckenberg & Associates Inc
BUSINESS LAW & TAX
Personal info and Popia provisions
• Case underscores complexity of balancing privacy rights with legitimate need to defend legal rights
Shenaaz Munga & Priyanka Raath ENS
In De Jager v Netcare Limited (Case No 42041/16) heard in the High Court of SA, Gauteng Division, De Jager raised concerns about privacy violations following the collection of his photos and videos via surveillance, arguing this was done without his consent or knowledge De Jager instituted an action against Netcare, in which he sought payment exceeding R24m Netcare processed De Jager’ s personal information, following the institution of the action, for purposes of defending the action According to Netcare, it gathered evidence to dispute the plaintiff’ s health status, which was central to the case
The plaintiff relied solely on section 14 of the Constitution (right to privacy) rather than the Protection of Personal Information Act, 2013 (Popia) The court applied the principle of subsidiarity and held that when legislation such as Popia exists to protect a constitutional right, it must be relied on instead of invoking the Constitution directly The court held that the informational privacy law in SA has been codified in Popia Accordingly, De Jager’ s objection to the evidence ought to be dismissed on the
basis that he failed to rely on the provisions of Popia
The court did not stop there It went further and analysed whether the implicated evidence would pass muster under Popia In doing so, the following provisions of Popia were considered:
1 Section 6(1)(e): The exclusion of Popia relating to judicial functions of a court referred to in section 166 of the Constitution relates to the
SURVEILLANCE EVIDENCE, WHEN CRUCIAL TO A PARTY’S DEFENCE, MAY BE ADMISSIBLE IN THE INTERESTS OF JUSTICE
processing of personal information within courts in SA and within the courts’ functions
2 Section 11(1)(f): Personal information can only be processed if the processing is necessary for pursuing the legitimate interests of the responsible party Since Popia lacks a definition of “legitimate interest” , the court applied the analysis contained in section 36 of the Constitution to assess lawfulness and reasonableness The court found that the surveillance was justified, as no less restrictive means were avail-
able to achieve the defendant’ s goal
3 Section 18: Notification must be given to a data subject whose personal information is being processed The court held that compliance with section 18 was not required per section 18(4)(c)(iii) The court commented that “the sting in any surveillance is in the element of surprise and surreptitiousness ” and correctly concluded that if De Jager had been warned, he would have organised his affairs accordingly Section 18(4)(c)(iii): Notification to the data subject, that his personal information is being processed, is not necessary for the conduct of proceedings in any court or tribunal that have been commenced or are reasonably contemplated The court held that this subsection could have been relied on if section 27(1)(b) did not apply
4 Section 26 which prohibits the processing of special personal information must be read together with section 27 (the general authorisation concerning special personal information) According to the court, section 26 shared the centre stage with section 27
5 Section 27(1)(b) which excludes the prohibition of special personal information does not apply if the processing is necessary for the establishment, exercise or defence
of a right or obligation in law
The court confirmed that Netcare was defending a right in law after a summons was issued It was held that the processing of evidence through surveillance would have been lawful under section 27(1)(b) The court commented that section 27(1)(b) would not extend to, for example, the taking of pictures of a party inside their home, bedroom or bed
6 Sections 34 and 35: The court expressed its displeasure at the processing of personal information of children and non-data subjects The court ordered that the personal information of the children and those family members of De Jager who were not data subjects should be redacted in an attempt to ameliorate the harm they faced
KEY FINDINGS AND TAKEAWAYS
● Privacy claims should be based on Popia rather than only constitutional rights A failure to do so may result in the dismissal of the claim
● The processing of special personal information (such as health data) is justified under section 27(1)(b) when it is necessary to defend a legal right
● Legitimate interest must be assessed using a section 36 constitutional analysis, con-
sidering whether the processing of personal information is reasonable and justifiable in an open and democratic society
● Prior notification under section 18(4)(c)(iii) of Popia may be omitted, when notifying the data subject would undermine the purpose of the surveillance
● Section 6(e) of Popia, which exempts judicial functions, only applies to courts’ processing of personal information
● Personal information of irrelevant third-party data subjects must be redacted to protect the privacy of individuals visible in the footage
● Surveillance evidence, when crucial to a party’ s defence, may be admissible in the interests of justice
OUR REFLECTIONS
● We support the section 36 analysis to assess a legitimate interest It is more detailed than the ICO’ s three-step test (purpose, necessity and balancing), but deference can still be given to international approaches The South African approach provides a structured constitutional framework, reinforcing the balance between privacy rights and justifiable data processing
● The case highlights an important point about the role of privacy notices While the
court was correct in finding that Netcare did not need to notify De Jager immediately before conducting surveillance, a standard privacy notice explaining that personal information could be collected for legal defence purposes may have been beneficial This would align with Popia’ s principles In addition, it maintains transparency with patients without undermining the defence process
● However, we disagree with the court’ s approach regarding so-called “ nondata subjects” The fact that an individual’ s information is not relevant to the case does not make them a non-data subject Any identifiable person in the surveillance footage qualifies as a data subject under Popia The proper legal question should be whether their data must be redacted based on relevance and data minimisation principles, not whether they qualify as data subjects in the first place The court reached the correct conclusion on redaction, but the reasoning behind it could have been more precise The case underscores the complexity of balancing privacy rights with the legitimate need to defend legal rights, especially when sensitive personal information, such as health data, is involved
Court sends message: give credit where credit is due
Evan Pickworth Business Law & Tax Editor
A healthy credit score is an essential ticket to ride for many participants in the modern economy
It could mean the difference between qualifying to buy that first home or car, crucial steps for many people on their road to financial independence It also determines interest rates and helps people set financial goals While a credit score does require careful policing to ensure results are verifiable, it is equally important
bad credit scores can be expunged in appropriate cases While this should never be allowed willy nilly else bad actors will run amok credit bureaus should not make it impossible for those with bona fide cases to have their records expunged, putting them back on track to enjoy all the benefits of credit, the lifeblood of the economy I have heard of too many cases where debt collectors use blacklisting as a tool to intimidate and force claims even where there is a genuine dispute as to whether
the claim is valid or not Simply claiming an amount due is very different to having a legally enforceable right to the amount
It is bizarre and certainly not within the confines of the law that some debt collectors get away with blacklisting even before a court judgment has been made
A recent decision in the high court in the Free State, Manamela and Others v Transunion Credit Bureau and Others, offers some solace for those fighting an adverse credit listing and sends a clear message on the
role of bureau in verifying information before hitting the bad credit button
The applicants wanted the submission of the consumer credit information, which resulted in the recording of an adverse credit listing, be
CREDIT BUREAUS SHOULD NOT MAKE IT IMPOSSIBLE FOR THOSE WITH BONA FIDE CASES TO HAVE THEIR RECORDS EXPUNGED
declared invalid, unlawful, alternatively unconstitutional Further, they wanted the respondent to be ordered and directed to expunge the adverse credit listing from its records without delay
While credit bureaus are often stuck in the middle, acting on information provided by credit providers, this case showed that the inquiry did not start with section 72(1)(c) but 70(2)(c) of the National Credit Act 34 of 2005 The credit bureau had to satisfy itself that the credit provider properly informed the applicants, as consumers, before
the adverse credit consumer information was reported or reflected on their credit profile There was no evidence the credit bureau took reasonable steps to verify that the credit provider informed the applicants before the adverse credit information was reported to it It was contended the credit bureau would not have published the information had it taken reasonable steps to verify its accuracy The court granted the relief sought, which will let many consumers sleep a little easier at night
Agriculture patents boost innovation
• They encapsulate a wealth of information that can transform the country’ s farming practices
Dr Bernard Dippenaar ENS
Agriculture has long been at the heart of human development, evolving from early farming practices to today’ s hi-tech, precision-driven agriculture
However, as the global population increases and climate change threatens food security, agricultural innovation has become more critical than ever One way to measure and drive progress in this space is through patents, so as to protect new technologies while also serving as a valuable tool for identifying and understanding advancements in agricultural science and engineering
The past decade has seen a significant increase in patent filings within the agricultural sector This trend highlights the sector’ s ongoing transformation, spurred by advances in biotechnology, artificial intelligence (AI), irrigation systems, pest management and climateresilient crops The uptrend in patent filings from 2014 to the present illustrates the industry’ s commitment to innovation and the commercialisation of cutting-edge solutions WHY PATENTS MATTER IN AGRICULTURE
Patents are far more than a legal mechanism to safeguard inventions they are also a rich repository of technical knowledge A patent application requires the inventor to disclose, in detail, how the invention works
This disclosure provides a roadmap for others in the industry to understand emerging technologies, potentially improving their own processes or inspiring new solutions
For agriculture, this is particularly important With patents covering everything
PATENTS ARE MORE THAN JUST A TOOL FOR PROTECTING IP THEY ARE A WINDOW INTO THE FUTURE OF AGRICULTURE
from genetic modifications in crops to automated machinery, irrigation technologies and sustainable farming solutions, they encapsulate a wealth of information that can transform farming practices
For example, patents for drought-resistant crop varieties not only protect the breeders’ investments but also share essential insights
about the genetic traits that make the crops resilient
Full patent documents are typically easily available online
One valuable online resource to locate these documents is Google Patents, which can be accessed at https://patents google com/
Moreover, patents play a critical role in fostering collaboration between research institutions, private companies and governments In an increasingly interconnected world, these partnerships are vital to solving complex agricultural challenges
The South African context: A strategic opportunity SA, with its diverse climate and rich agricultural heritage, is uniquely positioned to benefit from agricultural innovation However, as with any jurisdiction, its IP landscape presents both opportunities and risks
If a patent is not filed in SA, the protected technology cannot be enforced in the country This creates an opportunity for local businesses and innovators to freely use such technologies, either directly or as part of their own advancements For example, if a revolutionary pest management system is patented in the US but not in SA, local agricultural businesses can adopt the system without facing infringement claims They may also
NEW IDEAS TAKE SEED
improve on the technology and file their own patents locally or internationally
This highlights a key advantage of monitoring patent filings globally: the ability to identify and leverage innovations that have not been extended to SA By closely studying such patents, local innovators can gain a competitive edge and even leapfrog into more advanced farming techniques
A snapshot of growth in agricultural patents
Patent filing trends provide a powerful lens through which to observe the growth and direction of agricultural innovation From 2014 to now, the number of patent filings in agriculture has steadily increased This upward trajectory reflects the convergence of traditional farming practices with modern technologies such as machine learning, precision irrigation and genome editing
The growth in patent filings is not limited to one region or type of innovation
Globally, patents have been filed for:
● Biotechnology advancements innovations such as CRISPR gene-editing techniques for creating pestresistant or higher-yield crops
● Smart farming solutions technologies integrating IoT
devices to monitor soil moisture, weather conditions and crop health in real time
● Automation and robotics machines that automate planting, harvesting and pest control, reducing reliance on manual labour
● Sustainability-focused technologies developments in composting, biofertilisers and water-efficient irrigation systems
Leveraging patents for agricultural growth
To remain competitive in the global agricultural landscape, it is crucial for businesses, researchers and policymakers to prioritise patents both as a source of innovation and as a tool for strategy
Businesses should actively monitor global patent filings to identify untapped technologies that could be utilised locally
Meanwhile, researchers should focus on developing solutions that address specific regional challenges, such
PATENTS HELP FOSTER COLLABORATION BETWEEN RESEARCH INSTITUTIONS, PRIVATE COMPANIES AND GOVERNMENTS
as drought resistance in SA’ s arid regions or pest control methods suited to local ecosystems
For governments, creating an environment that encourages agricultural innovation is key Offering incentives for patent filings, funding research programmes and supporting public-private partnerships can accelerate the pace of agricultural transformation
CONCLUSION
Patents are more than just a tool for protecting IP they are a window into the future of agriculture By disclosing how technology works, patents provide a foundation for further innovation and collaboration Where a country such as SA is sometimes overlooked in global companies’ patent filing strategy, South African companies stand to benefit by utilising and building on these innovations to drive local growth
The upward trend in agricultural patent filings highlights the importance of innovation in addressing global challenges such as food security and climate change By leveraging patents strategically, the agricultural sector can ensure it remains resilient, sustainable and equipped to feed the growing global population
Update on partial tax exemption in Mauritius
Javed Niamut & Nafiisah Jeehoo Bowmans Mauritius
In 2023, the Assessment Review Committee (ARC) ruled against Alteo Energy (Alteo) with respect to a claim for an 80% partial income tax exemption on interest income under the Income Tax Act 1995 (ITA), on the basis that the interest income was not derived from the core income generating activities (CIGA) of Alteo As context, under the ITA, interest income would qualify for an 80% income tax exemption, provided the receiving entity meets the
conditions prescribed in Regulation 23D (2) of the Income Tax Regulations 1996 (ITR)
These conditions are that the company:
● Carries out its CIGA in Mauritius;
● Employs directly or indirectly an adequate number of suitably qualified persons to conduct its CIGA; and
● Incurs a minimum expenditure proportionate to its level of activities
The ITR further specifies that with regard to interest income, CIGA includes agreeing funding terms, setting the terms and duration of any financing, monitoring and revising any agreements
and managing any risks
In its 2023 ruling, the ARC ruled that for a claim of partial exemption concerning interest income, the interest income must have been derived from the main business activity of Alteo based on its interpretation of the intention of the legislator
This resulted in an additional limb to the conditions
UNDER THE INCOME TAX ACT, INTEREST INCOME WOULD QUALIFY FOR AN 80% INCOME TAX EXEMPTION
under Regulation 23D (2) of the ITR and limiting the application of partial exemption with respect to interest income only to companies having a financing business as a main business activity Alteo appealed against the decision of the ARC with the Supreme Court of Mauritius which delivered its judgment setting aside the decision of the ARC on January 31 2025
The Supreme Court found that the language in Regulation 23D (2) of the ITR is unequivocal and unambiguous to the effect that only a company that satisfies the three conditions enumerated therein will benefit from the
partial exemption on interest income
CIGA should be given its natural meaning (ie any business activities that generate the main income of the company) as well as the extended statutory meaning given to CIGA to claim the partial exemption on interest income
The Supreme Court further added that the clear words do not provide room for any further conditions to be imposed so that the ARC was wrong in law to read more than what has been expressly provided and hold that the interest income must be derived from CIGA or that
CIGA must necessarily include production of interest income
This judgment clarifies the position for eligibility for a partial exemption with respect to interest income, limiting eligibility to the conditions specified in Regulation 23D (2) of the ITR
It confirms that it is not a requirement for the main business of the company to include production of interest income for the application of the partial exemption This judgment sets an important precedent for taxpayers in Mauritius, particularly companies generating incidental interest income
/123RF HAIDERALI886
BUSINESS LAW & TAX
Agile legal frameworks vital
• Legal approaches must be flexible enough to respond to rapidly shifting geopolitical landscapes, including trade tensions and regional instability
Milton Cheng Baker McKenzie Global Chair
Geopolitical resilience was a prominent topic at Davos 2025, with leaders addressing the complexities of international conflict and economic uncertainty Legal approaches must be flexible enough to respond to rapidly shifting geopolitical landscapes, including trade tensions and regional instability This requires harmonised international agreements and adaptive legal strategies that can mitigate risks, facilitate diplomacy and promote a stable global order By integrating legal expertise with geopolitical insights, policymakers can craft solutions that not only manage current challenges but prepare for future uncertainties
The recent discussions at Davos highlighted the need for innovative economic models that balance growth with sustainability Legal systems play a vital role by creating a predictable regulatory environment that encourages investment in emerging tech-
nologies and supports the transition to new industries By harmonising rules across jurisdictions and ensuring accountability, legal frameworks can stimulate innovative financing and risk management strategies that address economic instability while laying the groundwork for long-term, inclusive growth
Legal frameworks create a stable environment for collaboration by setting clear rules and enforceable agreements that bridge public and private interests They ensure transparency, harmonise cross-border regulations and protect intellectual property, which in turn builds confidence among stakeholders At Davos 2025, it was emphasised that restoring trust through such frameworks is critical, as it paves the way for
DISCUSSIONS HIGHLIGHTED NEED FOR INNOVATIVE ECONOMIC MODELS THAT BALANCE GROWTH WITH SUSTAINABILITY
coordinated responses to geopolitical tensions and technological disruptions
Legal instruments are essential for setting enforceable environmental standards and incentivising sustainable practices At Davos 2025, the urgency of addressing climate change was a central theme, with leaders calling for regulatory measures that promote renewable energy, limit emissions and enforce compliance Well-crafted legislation can support the energy transition by balancing energy security with environmental responsibilities, thereby creating a regulatory landscape that drives both green innovation and long-
term planetary health
Legal instruments are essential for setting enforceable environmental standards and incentivising sustainable practices
Legal frameworks for energy transition strategies focus on renewable energy adoption, stakeholder engagement and environmental impact These strategies are essential for navigating the complex regulatory environment and achieving energy transition goals
Governments worldwide have continued to develop and refine regulatory frameworks supporting energy transition technologies This includes clean hydrogen, carbon capture and storage
(CCS), sustainable fuels, electric vehicles (EVs), renewables and battery storage
These frameworks are essential for setting standards and ensuring compliance
New regulations have also introduced further disclosure and reporting requirements for corporates These requirements help ensure transparency and accountability in the energy transition process
Examples
● Hydrogen projects: Baker McKenzie has been actively involved in pioneering hydrogen projects The firm helps businesses understand the role of hydrogen in the energy transition, the legal and regulatory framework in
different jurisdictions, and key risks and considerations for hydrogen projects
● Carbon capture and storage: Baker McKenzie offers training on CCS, covering policy to project implementation and its role in the energy transition We discuss regulatory approaches to CCS/ CCUS, CCS and climate change, legal and regulatory frameworks across different jurisdictions, CCS project business models, and key considerations/risks from a legal/project perspective
Well-crafted legislation can support the energy transition by balancing energy security with environmental responsibilities and creating a regulatory landscape that drives both green innovation and long-term planetary health
Emerging technologies require agile and adaptive legal frameworks that can keep pace with rapid innovation while ensuring ethical and responsible use Discussions at Davos 2025 underlined the transformative impact of AI and other technologies on industries, making it clear that current legal paradigms need to evolve By addressing issues such as data privacy, cross-border regulatory challenges and IP rights, modern legal systems can facilitate innovation, secure supply chains and support the digital transformation that defines the intelligent age
SIU’ s delayed Kwasa review condoned
Aslam Moosajee & Olonathando Nxumalo ENS
The Special Investigating Unit (SIU) instituted proceedings before the Special Tribunal to review and set aside the SA African Social Security Agency (Sassa) award of a tender to Kwasa Food Supplies (Pty) Ltd for the provision of food parcel under the state-funded Social Relief Distress programme (SRD)
The SRD serves the most vulnerable in society, thus evoking much emotion when allegations of irregularities surrounding the tender were made
There was a substantial delay on the part of the SIU to institute these proceedings
The decision to institute proceedings was taken in July 2021, but the application was only instituted on March 24
2024
In reaching the conclusion that the SIU s delay was not wilful nor unreasonable, the Special Tribunal took the fol-
lowing facts into account:
● 1 The delay in filing the application was a result of the overwhelming number of cases of irregularities that the SIU had to investigate arising from the procurement process during the Covid-19 pandemic period
● 2 The lack of resources at that time within state institutions was also a huge factor that resulted in the delay (ie it faced challenges with the appointment of counsel due to outstanding counsel fees; the state attorney was overwhelmed with work as the Covid-19 matters added to its already known backlog; and the SIU faced difficulties in respect of establishing a panel of attorneys in private practice to render services directly to the SIU)
The Special Tribunal further emphasised that the delay must be judged together with the merits of the case
The tribunal held that the prospects of success in this case were not without merit and an analysis was neces-
sary to assess whether the relief sought was appropriate in accordance with South African jurisprudence It was further held that it is in the interest of justice to grant condonation
Therefore, the Special Tribunal granted condonation for the late filing of the review application The tribunal then proceeded to determine the main relief sought by the SIU Did the ambit of the proclamation cover the SRD programme?
This issue concerned the interpretation of the proclamation and the schedule to the proclamation The proclamation gave the SIU the powers to investigate unlawful or improper conduct which took place between January 1 2020 and the date of publication of this proclamation or which took place prior to January 1 2020 or after the date of publication of this proclamation, but is relevant to, connected with, incidental or ancillary to the matters mentioned in the schedule
On the other hand, the schedule empowered the SIU to investigate the procurement of goods and services which has caused or may cause serious harm to the interests of the public or any category thereof during, or in respect of the national state of disaster
The interpretation became an issue because the tender was initiated before the state of national disaster but was ultimately awarded during the state of disaster Kwasa argued that the SRD had nothing to do with the state of disaster
In determining this issue,
THE DELAY IN
FILING
THE APPLICATION WAS A RESULT OF THE OVERWHELMING NUMBER OF CASES OF IRREGULARITIES THE SIU HAD TO INVESTIGATE
the Special Tribunal found that on a plain as well as a contextual reading, the proclamation and the schedule really covered services rendered during the time of the disaster or in respect of the state of national disaster
Accordingly, to read the proclamation and the schedule harmoniously the proclamation correctly covered the SRD programme, albeit that the tender was initiated before the period of the national disaster The investigation by the SIU was accordingly valid
Was the deviation granted by the Treasury good in law?
Treasury Regulation 16A6 3 requires the advertisement of a tender for a minimum period of 21 days before the closure of the tender Sassa requested a deviation in the tender process based on the nature of the service, the fact that it was urgent and that it provided social relief to the poor Treasury allowed the
deviation The SIU argued that this decision was based on incorrect facts Kwasa contended that the SIU cannot have the tender set aside without challenging the Treasury s decision to have the deviation set aside
The Special Tribunal held that South African jurisprudence is clear that a decision remains valid until set aside In the absence of a challenge to set aside the Treasury s decision, it remains valid until set aside Based on the reasoning in MEC for Health, Eastern Cape, and Another v Kirland Investments (Pty) Ltd t/a Eye & Lazer Institute, the Special Tribunal held it may well be that the approval was defective, but it remained in place until set aside
Although the SIU was successful on the question of condonation and the ambit of the proclamation, Kwasa was substantially successful in the main relief sought by the SIU The SIU failed in reviewing and setting aside of the tender sought
ALL EYES ON DAVOS
/REUTERS
BUSINESS LAW & TAX
Navigating Africa’s competition law
•
Updated regimes create layers of regulation that businesses must manage
Heather Irvine, Joyce Karanja, HB Senekal, Judd Lurie, Richard Bryce, Nazeer Mia, Yinka Edu, Udo Udoma & Belo-Osagie Bowmans
Competition law regimes are evolving across Africa and, while there is some way to go before a continental competition regulator is realised, there has been significant movement in terms of competition regimes being imple-
PIECES OF THE PUZZLE
mented and updated at national and regional levels, creating layers of competition regulation that businesses transacting across borders must navigate
The African Continental Free Trade Area (AfCFTA) aims to promote economic development through trade liberalisation, facilitating regional integration and
enhancing cooperation among member states There are several pieces of enabling legislation (protocols) that are intended to give life to the endeavours of AfCFTA, one of which is the AfCFTA Competition Protocol
A continental competition authority is envisioned as part of this protocol, with competencies including con-
sidering mergers that have an effect at a continental level, where they meet certain financial thresholds The exact scope and financial thresholds for the merger control regime are not finalised, although there was some movement when draft AfCFTA Competition Regulations were published for comment in 2024
LEGAL SCOOP
From a merger control perspective, it appears that an intention of the AfCFTA Competition Protocol is to avoid situations involving dual or even multiple notifications
Ideally, where a transaction is continental in dimension and meets the relevant financial thresholds, it should be presented to the yet-to-beestablished AfCFTA Competition Authority
However, the draft AfCFTA Competition Regulations also appear to make provision for a referral mechanism whereby, for example, a national competition authority may request the AfCFTA Competition Authority refer a transaction notified to it to the national competition authority, either in whole or in part There is thus scope for national competition authorities to take jurisdiction in transactions notified to the AfCFTA Competition Authority
As competition regulation
across Africa continues to evolve, clarity will be required regarding competition law concurrency of jurisdiction However, competition authorities on the continent have been collaborating for some time, and it is anticipated that the layers of continental, regional and national competition law will fit together in a way that streamlines the merger notification process It will be essential to establish clear guidelines and cooperative mechanisms to manage this effectively
Businesses can mitigate the challenges presented by multiple competition law regulators by assessing merger control obligations as early as possible in the deal process paying particular attention to review timetables and the possibility of not only competition-related commitments but also public interest-related commitments
Exercise of a unilateral discretion in contracts
The recent Supreme Court of Appeal (SCA) ruling in SPAR Group Limited and Others v Twelve Gods Supermarket (Pty) Ltd and Others appears to show our courts’ continued inclination to apply standards of good faith, fairness and reasonableness in enforcing contractual terms which appear unduly weighted in one party’ s favour This has been evident from previous decisions such as Beadica 231 CC which was cited and analysed by the SCA in the present case
The SPAR Group operates its model through the SPAR Guild of Southern Africa NPC (the guild), a voluntary trading group, but essentially equivalent to a franchise model Members of the guild are granted the right, in terms of membership agreements, to use SPAR s intellectual property (IP) such as trademarks, but also receive the benefit of favourable pricing and a streamlined distribution and logistics system
The respondents in the matter each form part of the Giannacopolous Group (the Respondent Group) which operates a number of stores under the SPAR and TOPS trademarks Each store within the Respondent Group had entered into a membership agreement with the guild as well as a credit facilities agreement with the guild, enabling them to purchase goods from the SPAR warehouse on credit
and to utilise a so-called “drop shipment” service Through the drop shipment service, the guild member is authorised to place orders directly on SPAR’ s various suppliers, who debit SPAR and SPAR then effects payment to the supplier and recovers the money from the guild member SPAR thus effectively serves as a guarantor of the transactions between the guild member and the supplier
The central issue for consideration by the SCA was the construction to be given to a clause in the credit facilities agreement which conferred a unilateral discretionary power on SPAR to vary or terminate the credit facilities granted to a guild member
The relationship between SPAR and the Respondent Group dates back more than 20 years but had been deteriorating from about 2019 SPAR claimed the Respondent Group had violated the terms of the membership agreements In the context of this animosity, SPAR took aggressive legal steps, including bringing ex parte applications against stores operated by the Respondent Group in an
attempt to assume control over these stores by perfecting security SPAR held under various notarial bonds These orders were ultimately set aside
On the day before the ex parte applications were launched, the guild held what was ostensibly a disciplinary hearing, without any representative of the Respondent Group being present, and resolved to terminate the guild membership of every store in the Respondent Group
Having failed in their attempted takeover of the stores, SPAR proceeded to unilaterally amend the trading terms of the Respondent Group, reducing payment periods under the credit facility and capping supplier credits, effectively placing a limit on the quantity of goods the Respondent Group could purchase through the drop shipment system
SPAR, as justification, cited alleged concerns about the Respondent Group s liquidity and ability to fulfil its short-term financial obligations as well as concerns about compliance orders issued by the department of labour against stores in the Respondent Group The Respondent Group challenged these amendments in two applications in the High Court
These applications were heard together in the KwaZulu-Natal Division of the High Court,
Pietermaritzburg (court a quo) and both were upheld This led to the matter being taken on appeal by SPAR to a full bench of the KZN Provincial Division The full bench dismissed the appeal SPAR persisted and sought leave from the SCA to appeal When the SCA declined, SPAR approached the President of the SCA to reconsider this decision
The crisp issue for decision by the SCA was whether SPAR s unilateral discretionary power had to be exercised subject to the arbitro boni viri standard, requiring decisions to be made reasonably, in good faith and without arbitrariness
At the heart of the court a quo s decision, and subsequently the decision of the full bench of the high court, was the judgment in NBS Boland Bank v One Berg River Drive CC and Others The court in NBS Boland came to the view that: unless a contractual discretionary power was clearly intended to be completely unfettered, an exercise of such a discretion must be made arbitrio boni viri The SCA considered whether the NBS Boland rule finds application SPAR argued that there was no ongoing contract in place where SPAR had to determine the contractual performance required of the Respondent Group SPAR s argument was effectively that each time a member of the Respondent
Group placed an order through the drop shipment system, it constituted a new contract and was therefore subject each time to a fresh offer of credit which the Respondent Group could accept or decline Therefore, it argued, the NBS Boland rule did not come into play
The SCA reject this argument, based on the facts It noted that some of the credit applications go back 20 years and the terms had remained unchanged until 2019 The court further took the view that the provisions of the relevant clause in the credit facility agreement could not be interpreted in isolation from the rest of the terms governing the relationship between the parties The court referred to numerous other provisions in the suite of agreements concluded between the parties and concluded that they were indicative of an ongoing contractual relationship, making unilateral variations subject to reasonableness standards
The court ultimately considered whether SPAR had exercised its unilateral discretionary power arbitrio
MEMBERS OF THE GUILD ARE GRANTED THE RIGHT, IN TERMS OF MEMBERSHIP AGREEMENTS, TO USE SPAR’S INTELLECTUAL PROPERTY
boni viri and on the facts before it, concluded that SPAR had failed to do so
This decision raises several practical implications for traders who grant their customers the use of a credit facility or for buying groups and franchisors who provide their members the benefit of some form of arrangement akin to a drop shipment system Credit facilities and credit applications almost invariably contain language to the effect that the extension of credit by the supplier in one instance shall not be construed as creating an obligation to extend credit in future; or that the credit terms may be varied by the creditor at any time in its sole discretion Where the relationship between the parties is one which, on the facts, evidences an ongoing contractual relationship, the creditor would not be able to simply terminate credit or vary the credit terms it would need to apply its mind and make the decision on objectively reasonable grounds such as the debtor remaining in default of its payment obligations The same rationale and standard would apply to the revocation of a drop shipment type of arrangement or the imposition of supply limits
This ruling serves as a warning to traders, buying groups and franchisors that a unilateral contractual discretion must be exercised fairly, or risk judicial intervention
/123RF WAELALREWEIE
BUSINESS LAW & TAX
Significant changes to legislation
• Revised regulations intended to come into effect in late 2025 and will impact current merger control
Heather Irvine, Joyce Karanja, HB Senekal, Judd Lurie, Richard Bryce, Nazeer Mia, Yinka Edu, Udo Udoma & Belo-Osagie Bowmans
The Common Market for Eastern and Southern Africa (Comesa) Competition Commission’ s (CCC) revised regulations are intended to come into effect in late 2025 and will impact the current merger control regime in several ways
For example, currently the regime is nonsuspensory, but parties are required to notify within 30 days of the “parties’ decision to merge” One of the significant changes brought about by the revised regulations is to do away with the 30-day rule and to change the regime from being a nonsuspensory regime to a suspensory regime
The revised regulations also propose introducing a fast-track process for merger assessment, particularly for those mergers that do not raise significant competition or public interest concerns
There has also been debate about the CCC’ s position as a one-stop shop The revised regulations are expected to reaffirm the CCC’ s exclusive jurisdiction over
mergers that have a regional dimension within the Comesa Common Market
EAST AFRICAN COMMUNITY (EAC)
While the East African Community Competition Authority (EACCA) is not a new regulator, the idea is that it too will function as a one-stop shop for its relevant member states, including Burundi, the Democratic Republic of the Congo, Kenya, Rwanda, Somalia, South Sudan, Uganda and Tanzania
The EAC Competition Act has been revised and supporting regulations prepared Only one member state has yet to ratify the amendments before they are brought into effect
The way the current legislation is phrased, for a transaction to be notifiable it will need to meet a regional dimension test, with either the acquiring firm or the tar-
THE REVISED REGULATIONS ALSO PROPOSE INTRODUCING A FAST-TRACK PROCESS FOR MERGER ASSESSMENT
get firm needing to operate in two or more member states
This means transacting parties could potentially have a filing obligation where the target does not operate in a member state, but the acquiring firm operates in two member states, with uncertainty as to how new legislation and regulations will clarify this
Further, unlike other jurisdictions where there is a joint obligation for the parties to seek clearance, the obligation is currently only on the acquiring firm These could change once the final legislation is published
ECONOMIC COMMUNITY OF WEST AFRICAN STATES (ECOWAS)
Ecowas is a regional economic bloc, currently comprising 12 member states, namely Benin, Cabo Verde, Côte d’Ivoire, Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Nigeria, Senegal, Sierra Leone and Togo Burkina Faso, Mali, and Niger withdrew their memberships from the economic bloc with effect from January 29 2025
The Ecowas Competition Regulatory Authority (Erca) published further legal instruments relating to competition law enforcement during 2024, including in
MEMBER STATES
relation to merger control (Ecowas Community Competition Rules) The Ecowas merger control regime is mandatory, requiring parties to notify the Erca of merger transactions where the parties operate in at least two Ecowas member states and meet specific financial thresholds The merger regime is also suspensory
Several Ecowas member states, including Nigeria, have operative national competition authorities and their own merger control regimes Some Ecowas members are also members of the West African Economic and Monetary Union (Waemu), where competition law is regulated by a different regional regulator, the Waemu Commission, whose merger control regime is voluntary and nonsuspensory
The Ecowas Community Competition Rules and supporting instruments confirm the primacy of the Erca’ s jurisdiction over conduct “likely to have an effect on trade within Ecowas” and “acts, which directly affect regional trade and investment flows and/or conduct that may not be eliminated other than within the framework of regional cooperation”
The Ecowas Community
Competition Rules also require the Erca to “ co-operate with national and regional competition agencies in taking measures necessary to ensure implementation of the obligations arising from the Ecowas Community Rules”
The Erca also aims to operate as a “one-stop shop” for cross-border transactions meeting the Ecowas financial thresholds for merger notification Where a merger is
SEVERAL ECOWAS MEMBER STATES, INCLUDING NIGERIA, HAVE OPERATIVE NATIONAL COMPETITION AUTHORITIES
notified to the Erca, the clear intention is that separate notifications to national authorities will not be required
Erca also intends to issue merger guidelines to clarify its approach and practice Developments at national level and concurrency of jurisdiction
The presence of multiple regional competition regulators and an envisaged continental competition regulator
raises questions around concurrency of jurisdiction, especially given some countries have dual membership in certain regional blocs Another issue to contend with is that certain countries have very active sector-specific regulators who enforce regulations that also include competition law principles In Nigeria, the Federal Competition and Consumer Protection Commission (FCCPC) is a young regulator but is already punching above its weight Nigeria’ s merger review period is limited to 120 business days, slightly shorter than the Ecowas review period, but, in practice, many transactions are being reviewed in a much shorter timeframe The merger control regime also caters for an expedited review Currently, there is no expedited review in Ecowas When the competition law regime was established in Nigeria, the FCCPC collaborated extensively with regulators across the continent; as such, further collaboration with a regional, and even a continental, regulator should not be problematic for the FCCPC
Kenya is a member of the EAC and Ecowas and has a strong national regulator, as well as various sector-specific regulators It will be interesting to see how these layers of competition regulation are considered and if multiple filings can be avoided Uganda recently enacted the Competition Act of 2024, although implementing regulations have not yet been published A “technical committee” within the ministry of trade is intended as the primary regulator of competition law matters in Uganda, but the country also has a number of sector-specific regulators responsible for competition regulation within a sector It is not yet clear what the workaround may be in relation to competition issues falling under common jurisdiction
/123RF WIEDEHOPF