BUSINESS LAW &TAX
APRIL 2021 WWW.BUSINESSLIVE.CO.ZA
A REVIEW OF DEVELOPMENTS IN CORPORATE AND TAX LAW
Bar wars: Tony’s tripped up
Campaign aimed at highlighting •human rights abuses has backfired Gaelyn Scott ENSafrica
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he well-known Dutch chocolate maker Tony’s Chocolonely has certainly managed to create a stir. Under the name Sweet Solution, the company has launched a range of chocolates that is interesting, to say the least. There are four different chocolates. Though each one is branded Tony’s and Tony’s Chocolonely, one chocolate looks very much like a Kit Kat, one very much like a Toblerone, one very much like a Twix and one very much like a Ferrero Rocher. These brands are owned by the major competitors of Tony’s Chocolonely — Nestle, Mondelez, Mars and Ferrero Rocher. The shapes of the new products are what Tony’s Chocolonely describes as “playful”, but we suspect the other companies might have a different expression for this. So, for example, the Kit Kat lookalike comprises a mix of the unequal-shaped blocks used by Tony’s and the wafer shapes of Kit Kat. But why is Tony’s doing this? Well, it’s apparently intended to draw attention to
the problem of slavery and child labour in the chocolate supply chain. Buyers are asked to sign a petition that supports the need for human rights legislation and seeks an end to the use of slavery and child labour. Tony’s Chocolonely’s plan was to launch this new range of chocolates in the UK, Netherlands, Belgium, Germany and the US. But, claims the company, its competitors put serious pressure on the UK supermarkets not to stock these limited-edition bars. We don’t have any information on how the launch has gone in the other countries. One report suggests these bars are now only available on Tony’s Chocolonely’s website. So, what are we to make of this? Seeking to end child labour, slavery and other abuses in the supply chain is, of course, totally laudable, but is it justifiable to use the
ITS COMPETITORS PUT SERIOUS PRESSURE ON THE UK SUPERMARKETS NOT TO STOCK THESE LIMITEDEDITION BARS
LOOK FAMILIAR?
word trademark. We’ll end by mentioning that Tony’s Chocolonely recently discovered that taking the moral high ground is one thing, staying on it is another. The company has been dropped from the Slave-Free Chocolate’s list of ethical chocolate companies. Tony’s
THE SIMPLE FACT IS ANY LEGAL ACTION WOULD LOOK BAD GIVEN THE ANTISLAVERY/ CHILD LABOUR DIMENSION
branding of competitors in the process? Cynics might see this as little more than a ruse to increase revenue. It is, in our view, highly unlikely that any of the chocolate maker’s competitors will take the legal route. The simple fact is any legal action would look bad given the antislavery/child labour dimension. But assuming we’re wrong, what remedy would the law provide? If this were to play out in SA, Tony’s Chocolonely’s competitors might well have a case, assuming they had SA trademark registrations for their labels, registrations that incorporate the colours.
Trademark infringement is dealt with in Section 34 of the SA Trade Marks Act. Section 34(1)(a) prohibits the “unauthorised use in the course of trade in relation to goods or services in respect of which the trademark is registered, of an identical mark or of a mark so nearly resembling it as to be likely to deceive or cause confusion”.
INFRINGEMENT
Even in cases where consumer confusion is unlikely to happen, there might still be a claim for infringement under section 34(1)(c), especially as the various chocolate getups are most certainly
well known. This section deals with infringement through the use of a similar mark where the registered mark is well known and the use is likely to “take unfair advantage of, or be detrimental to, the distinctive character or the repute of the registered trademark, notwithstanding the absence of confusion or deception”. Trademark laws in most countries have similar provisions to these. We suppose that one lesson to learn from this story is the importance of separately registering the product label, including in colour, as a trademark, in addition to the
Chocolonely’s website says this: “We have never found an instance of modern slavery in our supply chain, however, we do not guarantee our chocolate is 100% slave free.” It goes on to say that “we are doing everything we can to prevent slavery and child labour … [but] we cannot be there to monitor the cocoa plantations 24/7”. But it is thinking big: “Our ambition extends beyond our own bar, we want to change the whole industry which involves being where the problems are so that we can solve them … only then can we say we have achieved our mission to make all chocolate 100% slave free.”
Congratulations to Sanlam Private Equity and Cavalier Group winners of the SAVCA Private Equity Deal of the Year award
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BusinessDay www.businessday.co.za April 2021
BUSINESS LAW & TAX LATERAL THINKING
Expect fourth-quarter uptick
Business Day Law & Tax Editor, Evan Pickworth, interviews Isaac Fenyane and Cheván Daniels, •executives in the corporate commercial department at ENSafrica about the prospects for deal-making and commercial law in the year ahead
EP: I’ve seen some concerning numbers of M&A activity taking as much as a 60% hit during the worst days of the Covid-19 crisis. But that was last year — are you seeing any signs of blue sky or green shoots now? ENS: The percentage hit of 60% sounds about right if we consider the downturn in M&A activity in our own practices. During the worst days of the Covid-19 crisis, some M&A activity came to a grinding halt and the focus of clients was on managing/ protecting their existing businesses. That being said, towards the third quarter of 2020, we already began to see the signs of green shoots. Of course, some of the green shoots are fuelled by distressed disposals flowing from the impact of the Covid-19 pandemic, which left many companies cash-strapped and undervalued. Clients in industries that took the biggest hit during lockdown were already brainstorming about diversifying their offerings, which included acquisitions of business or companies offering complementary goods or services, lockdown sustainable business operations, technology add-ons etc. Private equity funds, investment holding companies, and family offices/ HNWIs have also been scouring the market for deals. However, actual deal flow (executed and implemented deals) remained low throughout 2020. EP: Of course, our GDP fell 7% last year — but that wasn’t as bad as it could have been were it not for mining exports, among others. Was the better performance last year a portend for better tidings from a deal-making perspective in 2021? ENS: It is too early to make bold predictions about better tidings for 2021. Ex-Africa, internationally, particularly in the US and Europe, M&A activity has started to pick up. We think SA is likely to follow suit, particularly towards the fourth quarter of this year, but this is dependent upon a variety of factors, including our ability to roll out Covid-19 vaccines (it already appears that vaccinating 40-million people by the end of this year may not be possible).
In addition, while the Covid-19 pandemic was a seismic shock to the South African (and global) economy, even pre-Covid, the South African economic fundamentals were not great — downgrading to junk status by the credit rating agencies, high unemployment, low growth, restrictive labour laws, too much regulation (aggravated by policy uncertainty), poorly performing/inefficient parastatals which put more burden on the strained national fiscus etc. Unless these issues are addressed, creating a more conducive M&A environment will remain a challenge. EP: And the future pipeline — can we expect to see a strong recovery this year? ENS: We think future pipeline and a strong recovery are two different things this year. We are seeing a strong pipeline of deals across a
WE THINK THERE WILL BE A LOT OF ACTIVITY IN THE TECHNOLOGY SECTOR, AND IN THE FOOD/AGRI SECTORS range of sectors, from those sectors that were hit hardest by Covid-19 (and, consequently, where value is to be potentially found) to those sectors that will continue on an upward trajectory from last year, in particular, in the technology sector. Whether that will translate into an actual recovery in M&A deals this year will depend on, among other things, whether parties can come to terms on pricing mismatches which are likely to arise (both on the low end for those businesses hit
hardest by Covid-19 and on the high end for those businesses that shot the lights out during the Covid-19 pandemic) and whether there is greater certainty around Covid-19, in particular, the roll out of Covid-19 vaccines in SA. EP: Your expectations for corporate activity over the next three years … ENS: Slow to moderate activity for most of 2021, an uptick in activity in the fourth quarter of 2021, more of the same for the first half of 2022, and then a strong increase in M&A activity for the second half of 2022 and into 2023. We think there will be a lot of activity in the technology sector generally, and in the food/agri sectors. Power and infrastructure deals will be prominent throughout Africa, but this was the case preCovid-19 as well. With mining on a bull run, there may well be activity in this sector, as companies seek to grow/consolidate. Private equity firms are likely to be active in the market over the next three years. And then within Africa, a country like Uganda stirs quite a bit of interest, while Rwanda is leading the charge on vaccinations. EP: Which are the areas which seem most exciting right now? ENS: Technology, particularly any form of payment platform, is likely to be exciting on the African continent. Perhaps counter-intuitively, we think hospitality might be an interesting and exciting space. As more and more American and Europeans are vaccinated, they may want to venture into wilderness areas, away from crowded areas in other parts of the world. There is also value to be had in the sector, if you take a medium to longterm view. EP: When we look at sectors, which are the most popular at the moment and why? ENS: Technology, for obvious reasons. However, this does not only apply to your traditional technology companies. The interest in technology will fuel creativity and activity in other sectors. For example, data-processing centres require real estate to house the date centres, online shopping requires warehousing space (both for the despatch of products and
Isaac Fenyane.
Cheván Daniels.
the receipt of returned goods), so this will also stimulate the real estate sectors, too. Across industries, companies are looking to find solutions to the challenges brought on by the Covid-19 pandemic by introducing technology into their businesses. We also think private equity funds are going to play a prominent role in SA and Africa generally. EP: What are the future trends in the commercial space to watch? ENS: The commercial space (whether in a professional space or business space) has been dramatically changed with the advent of Covid-19. The trends that will continue even beyond Covid-19 era include how people work and engage with each other so we expect further technological developments to enhance the current platforms and make it even more conducive to work and collaborate remotely and in a cost-efficient manner. With this, we expect companies in the technology and communications space to benefit from the trends while companies in the real estate and travelling space would need to readjust and remodel their business offerings to suit
the new business environment post Covid-19. EP: Is commercial law keeping pace with all the change, like the move to digital platforms? ENS: Traditionally, law has been slow to keep pace with change. However, what we have seen is the Covid-19
WITH MINING ON A BULL RUN, THERE MAY WELL BE ACTIVITY IN THIS SECTOR AS COMPANIES SEEK TO GROW/ CONSOLIDATE pandemic created such a fundamental shift in working in such a short period of time that we were forced to adapt quickly. We have successfully moved to digital platforms, worked from home and contributed to the environment by reducing the amount of paper we as lawyers traditionally use. EP: What are the biggest changes to the commercial law landscape and legislation we can expect this year? ENS: We do not foresee sig-
/123RF — PIXELERY
nificant changes to the commercial law landscape this year. However, we may see further progress on the proposed amendments to the Companies Act. In addition, if SA follows the lead of some of the European countries such as the UK, France, Italy and Belgium, there may be legislative measures (temporary and/or permanent) to our corporate insolvency and restructuring landscape to mitigate the economic impact of Covid-19 on struggling companies. That being said, one of the most significant changes has already taken place — the relaxation by the SA Reserve Bank of the exchange control rules regarding loop structures with effect from January 2021. Loop structures are now a thing of the past. EP: Your top line advice to a C-suite executive thinking about cross-border expansion this year… ENS: There are certainly arguments in favour of crossborder expansion, whether in the form of scaled-up pan-African multicountry operations or possible expansion into developed market economies. Ultimately, there must be a sound business case for expansion and avoid growth for growth’s sake. Be bold, but also tread cautiously. EP: And finally, your advice to that young law student considering a career in commercial law. What is the best way to lay the foundation from an educational perspective? ENS: If you can afford to do so, do not plough straight into an LLB degree. Any undergraduate degree, whether liberal arts (BA), commerce (BCom) or even science or engineering will provide you with a broader foundation from which to move into an LLB degree and make you a more rounded law student and commercial law practitioner. Read widely about SA and the broader African and global economies, and try to get some practical legal experience while at law school. Furthermore, because the law graduates pool is large and highly competitive, make sure your profile/resume stands out by scoring excellent grades, participating in extracurricular and community activities to exhibit all-roundness and leadership qualities.
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BusinessDay www.businessday.co.za April 2021
BUSINESS LAW & TAX
Tricky labour law proposals
Timing of suggestions from labour constituencies •problematic in Covid and recovery environment Jonathan Goldberg & Grant Wilkinson Global Business Solutions
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abour constituencies recently proposed amendments to labour legislation. In this article, we look at the proposals and discuss the practical implications of these as well as alternatives. The timing of these labour proposals are problematic in a Covid and Covid recovery environment. The first proposal is to move by means of legislation from a 45-hour work week to a 40-hour work week. Of importance here is the request for a reduction in hours comes without any reduction in wages. Mathematically, if that was the case in an organisation working a 45-hour working week, that would be an 11% increase. A further proposal is the increase of severance pay from the one week for every completed year of service to one month per year of service. The severance amount has been in place since the Basic Conditions of Employment Act No 75 of 1997 (BCEA). A comparative analysis was done with a number of other countries and figures vary in terms of the severance provided. In some countries such as Germany, Ghana, Italy, Japan and India no severance is paid irrespective of length of service. This is in stark contrast to countries such as Zambia which, after a period of a year, start having sever-
ance start at two weeks. Indonesia also starts at two weeks after one year’s service and then graduating further. Context is important in this regard and SA has, for many a year, been in financial dire straits. This negative financial situation has been exacerbated by the Covid-19 pandemic. At the moment, a number of organisations have been unable to pay even the one week per completed year of service and this has led to a number of liquidations in SA. To increase this will likely lead to a significant increase in the number of liquidations in the country.
A CHALLENGE FOR ORGANISATIONS IS THE SUGGESTED PROHIBITION OF THE USE OF REPLACEMENT LABOUR It is our view this would not be well placed as a legislated minimum. We support operational and central bargaining and most of these have severance pay negotiated. At plant level, then, parties could negotiate based on the merits and context of the organisation on a severance above the minimum. A proposal which may lead to further liquidations is the amendments of sections 189 and 197 of the Labour Relations Act (LRA), and particularly with 189, the tighten-
ing of the regulations on retrenchments. It is our view the current status quo should remain. As an alternative, for a period of 24 months, consideration should potentially be given to a relaxation of s189A and process all retrenchments under section 189 of the LRA. It is our experience that employers do not readily embark on s189s without valid reason and that to make this even more onerous would be challenging to businesses going forward. Other changes proposed include the expansion of the definition of workers to include independent contractors, actors, Uber drivers, self-employed and other atypical workers and for paid elderly care leave to be given to workers who need to take care of their sick parents. In respect of the annual adjustments of the income threshold, it is to be noted this is a function of the National Wage Commission. In addition is a proposal to adjust annual adjustments of the income threshold to protect the erosion due to inflation. It is our view the definition of employees is wide enough as is evidenced by the South African Uber case. The definition of workers has also been adjusted. One of the issues is the time period for retrenchment in section 189(A) of the LRA. The trade union proposing amendments in terms of retrenchments are the increase of the notice period from 60 days to 120 days as well as the right to strike after 60 days if there is no consen-
TERMS AND CONDITIONS
/123RF — VITALIY VODOLAZSKYY sus on the commercial rationale of the retrenchment. A challenge for organisations is the suggested prohibition of the use of replacement labour. Maybe as proposed above for enterprises to recover these should be a relaxation of these provisions for a period of, say, 24 months to facilitate recovery. In addition to the amendments mentioned in the article there are proposals for Coida, National Minimum Wage as well as the Unemployment Insurance Act. When one considers the proposals tabled by the trade union movement might lead to further job losses as well as more liquidations in our country. The Covid-19 pandemic has made it clear businesses need to put structures in place which are flexible to ensure they can react to these changes with a minimal
impact to both the majority of employees as well as business itself. Further amendments that could be considered besides those mentioned in the article are as follows: ● In the first 12 months of employment dismissals should be allowed for employees below the threshold with no substantive reason or without following a procedure. ● The three months in the entire section 189 (fixed-term contract, temporary employ-
IN SOME COUNTRIES SUCH AS GERMANY, GHANA, ITALY, JAPAN AND INDIA NO SEVERANCE IS PAID
ment services, part-time and equal treatment) to move to 12 months before the extra restrictions become effective. ● The dismissal of senior employee (for example above R1.5m total remuneration a year) be relaxed to allow for termination on three months’ notice. ● The relaxation of section 189A for 24 months. ● An expedited process to the minister for exemption from the minimum retrenchment pay in the BCEA to avoid liquidation. Covid-19 has placed a significant challenge on business in SA and the net result has been a number of business closures as well as job losses. We need to move to a time where laws allow the successful operation of lawful businesses and ensure their success and, in that, the growth of employment in SA.
Will tax reprieve save ferrochrome sector? Prenisha Govender & Angelo Tzarevski Baker McKenzie Johannesburg The government recently approved a tax on SA’s exported chrome, though the tax percentage and further details are still to be announced. The ferrochrome ore industry has been severely threatened in recent years, mostly due to increases in electricity tariffs for heavyuse industries that, combined with the unreliable power supply in SA, have crippled the industry to such an extent that reportedly 40% of the country’s ferrochrome mines have been unable to continue production. Some industry stakehold-
ers have suggested a special electricity tariff would be a better way to support the ailing industry, stating that the export tax will not provide much benefit if electricity supply and costs to the industry are not addressed. Some in the industry feel that the challenges chrome ore producers face mean they would not be able to sustain themselves, even after tax relief. This would not only negatively affect exports, but the downstream industry as well. SA is one of the world’s largest producers of ferrochrome and the industry could have a vital role to play in the country’s pandemic recovery, if its challenges can be successfully addressed.
The country exports 84% of ferrochrome to China, with Turkey and Zimbabwe, for example, producing smaller amounts. There has been concern that an export tax would mean other countries would be able to offer ferrochrome at cheaper prices than SA, with the country losing significant market share in the process. While China sources most of its chrome ore from SA, this could change if the product was available cheaper from other countries. However, it has also been noted that it would be difficult for China to move away from the type of ferrochrome it imports from SA. Others in the industry, however, welcome the
reprieve an export tax would provide. India has implemented a successful export tax for chrome ore, which has resulted in an increased tax base, higher investment in the industry, benefits to the local communities and skills development. Key industry stakeholders have expressed interest in collectively undertaking research to explore a more
THE FERROCHROME INDUSTRY COULD HAVE A VITAL ROLE TO PLAY IN THE COUNTRY’S PANDEMIC RECOVERY
viable and consolidated approach to support the ferrochrome industry. This process may involve the sharing of competitively sensitive information, which presents difficulties from a competition law perspective, and engagement on these issues has not been forthcoming. According to SA competition law, joint industry engagement of this nature may give rise to anticompetitive conduct by facilitating collusion or adversely affecting competition in the market. Accordingly, in December 2020 key industry players applied to the Competition Commission for an exemption from certain provisions of the Competition Act. If suc-
cessful, the exemption would permit stakeholders to jointly explore needed solutions in the industry for a period of two years. While there is no further information on whether the government will eventually impose export limitations and restrictions, the SA Revenue Service is expected to become aggressive in monitoring compliance and the collection of these export taxes when they do take effect. SA chrome ore producers who intend on exporting chrome should begin preparing, so they can be tax compliant and in possession of the relevant customs licences if new export taxes eventually become effective.
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BusinessDay www.businessday.co.za April 2021
BUSINESS LAW & TAX
Extra duties for directors
ROUND TABLE DISCUSSION
The traditional belief that company boards only •have to answer to shareholders, is being challenged Cohen Grootboom Adams and Adams
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here is an interdependency between companies and SA society that mirrors the African concept of Botho, otherwise known as Ubuntu: “I am because you are; you are because we are.” A company is dependent on the broader SA society to provide it with a conducive operating environment, a sustainable customer base and the skills it needs to operate, among many others. Should directors of a company then be required to run it solely in the interests of its shareholders, or should they take into consideration those of other stakeholders in broader SA society? Prior to the promulgation of the Companies Act 71 of 2008, the duties of company directors were governed by the common law and codes of best practice such as the various permutations of the King Report on Corporate Governance for SA. In terms of the common law, directors are required to act in the utmost good faith and in the best interests of the company, which includes
exercising care, skill and diligence with a view to promote company success by applying independent judgment. These requirements have been applied in judgments such as SA Fabrics vs Millmann, in which the court held that a company’s “interests” are only those of the company itself as a corporate entity and those of its members. Directors are required to manage company affairs in the interest of the body of shareholders as a whole and to maximise profits for the benefit of those shareholders. Although the common law remains applicable, the provisions of section 76(3)(b) of the Companies Act has largely codified the common law position. Section 76(3)(b) provides that, “A director of a company, when acting in that capacity, must exercise the powers and perform the functions of director — (a) in good faith and for a proper purpose; (b) in the best interests of the company […]”. It is clear the requirement to act in the best interests of the company is present both in the common law, as well as the act. However, the “best interests of the company” is not defined in the act. Efforts to give meaning to this phrase
continue. Meanwhile, three theories may shed light on how to interpret the phrase: ● Shareholder value or shareholder-centric approach This approach is premised on the idea that directors have an obligation to ensure wealth maximisation for shareholders and that a company is solely owned by its shareholders. It is in line with the position that the sole purpose of making a profit for the company entails that directors ought to exercise their duties solely for the benefit of
IN TERMS OF THE LAW, DIRECTORS ARE REQUIRED TO ACT IN THE UTMOST GOOD FAITH AND IN THE BEST INTERESTS OF THE COMPANY shareholders. Under this theory, the idea that it may exist for socioeconomic purposes too is unsustainable. ● Stakeholder/pluralist approach Shareholders are viewed as merely another stakeholder in the regard of directors
/123RF — ORLANDO ROSU along with various others. Directors may be required, if necessary, to forego shareholder profits to advance the interest of other stakeholders in the company. ● Enlightened shareholder value approach As with the shareholder-centric approach, this approach requires directors to maximise profits for the benefit of shareholders with the qualification that directors are also permitted to take stakeholders’ interests into account, as long as these remain subordinate to profit maximisation and shareholder interests. This theory aims to strike a balance between protecting the various competing interests of shareholders and stakeholders by recognising a company is an economic institution as much as it is a political and social institution. Within the SA context, various statutes such as the Labour Relations Act 66 of 1995, the Promotion of Access to Information Act 2 of 2000 and the Broad-Based Black Economic Empowerment Act 53 of 2003 place increasing pressure on the traditional view that directors are expected to manage a company only in the best interests of the shareholders
collectively. They should rather take into account the interests of all stakeholders — employees, creditors, consumers etc. It can be viewed as an indirect rejection by the legislature of a purely shareholder-centric approach. The duties directors owe to the company fall within the parameters of corporate governance. Although it does not possess the force of law, the King 4 Report on Corporate Governance for SA 2016 (King 4) is instructive on corporate governance best practice in SA and sets a minimum standard for directors’ conduct. King 4 refers to the “triple context” of the economy, society and environment in which a company operates as a singular, intertwined context, which directors must have regard to in their decision-making. Further, in a policy paper published by the department of trade & industry in 2004 entitled SA Company Law for the 21st Century: Guidelines for Corporate Law Reform, it specifically states: “SA cannot afford to be left behind. There is a growing recognition by companies and governments that there is a need for higher standards of corporate governance and ethics and
greater interdependence between enterprises and the societies in which they operate … sociopolitical and economic change in SA has underscored the need for social responsiveness, transparency and accountability of enterprises”. In the light of this clear state objective, the question remains whether the phrase “the best interest of the company” should be read through the lens of the stakeholder/ pluralist or the enlightened shareholder approach. My view is the enlightened shareholder approach should be taken in which the directors’ main objective remains to maximise profits for the benefit of shareholders, but also taking into account stakeholders’ interests, which remain subordinate to profit maximisation and shareholder interest. The act does not prescribe a mandatory or legal duty to directors to take stakeholder interest into account. However, if one has regard to the spirit, objects, and purposes of the act, the imperatives of the constitution and the principles of the codes of practice such as the King 4, it will be unavoidable for companies not to have regard to the interests of stakeholders. Therefore, on the question of whether it is necessary to broaden the traditional concept that directors owe a duty to the company only, there can be little doubt it has, at least indirectly, already been put forward. However, it would be useful for the legislature to incorporate these considerations into the act to avoid any doubt. This is not inconceivable: it has already partially done so by mandating public entities to appoint social and ethics committees.
CONSUMER BILLS
Speed required in deciding public interest cases
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he bill of rights gives everyone the right to have a legal dispute decided in a fair public hearing before a court or other tribunal. It’s a pity section 34 does not add the words “as soon as possible where the public interest is involved”. What brought this to mind was the recent court decision prohibiting the Independent Communications Authority of SA (Icasa) from proceeding with the radio frequency spectrum auction planned for March 2021. Even the spokesperson for Telkom, who successfully applied for the order, said they do not celebrate halting the process nor do they take any joy in delaying the much-needed licensing of high-demand spectrum. Telkom said that Icasa has a choice to dig in its heels and spend “an inordinate
PATRICK BRACHER amount of time in court” or try to find a solution. Seeing they have been trying to find a solution for years without success, let’s hope it is not the other alternative. In the meantime consumers are being denied better, faster, much-needed spectrum for mobile operators. It does not take an expert to know that better, faster spectrum for data is a golden key for the economy and for education and we all know what inordinate delays in legal proceedings mean. Important public issues fought out between litigants
can take five to 10 years to go through the high court, the Supreme Court of Appeal and the Constitutional Court before getting to a final decision. Public projects get delayed for years while tender irregularities are being challenged. Or irregularly awarded projects are completed by the people who were awarded the irregular tender because that is the only way to get anything done. Billions are spent on suspended public officials while their dismissal inquiries are delayed over years, sometimes deliberately by those pocketing the money. All this costs we consumers a great deal of our hard-earned tax payments. Recent litigation in England and SA regarding Covid-19 insurance claims
illustrate what can be done. In England, the Financial Conduct Authority decided that policyholders as consumers needed an early decision in regard to the liability of insurers under their business interruption policies. The legal process began with a test case in the UK High Court in June 2020 and the whole process through two courts was completed by a judgment on appeal of the UK Supreme Court on January 15. Eight parties to the proceedings had to get on with it and there was no question of asking for a postponement for more time to deal with any issue. In SA a similar matter, which commenced after the March 2020 lockdown, went through the high court and the Supreme Court of Appeal where the final decision was made by mid-December
because of the public need for an urgent final decision. We all understand resources are not infinite and this cannot happen in every case. But we as consumers should have rights to hasten the process. There is a process called “friends of the court” (amicus curiae) for interested parties to make submissions regarding the legal issues in any public interest matter. That is not the point. There needs to be a process whereby the public and NGOs which protect our interests can make submissions in regard to the
PUBLIC PROJECTS GET DELAYED FOR YEARS WHILE TENDER IRREGULARITIES ARE BEING CHALLENGED
process. The speed of the process should not be only in the hands of the litigants. Important public issues should not be subject to lengthy delays or postponements because the litigants are not willing or geared up to proceed to a quick outcome. Resources should be applied to ensuring there are courts and tribunals available for quick solutions to major problems that cost us all money and deprive us of the benefits of essential things like quicker and better data. We don’t want court process, we want justice. Where the general interest is being deprived of justice, the old saying that justice delayed is justice denied is a sad truth to be overcome. ● Patrick Bracher (@PBracher1) is a director at Norton Rose Fulbright.
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BusinessDay www.businessday.co.za April 2021
BUSINESS LAW & TAX
Energy plan lights the way
A’s recovery depends on a reliable power supply •—Sand the government is finally making progress Kieran Whyte Baker McKenzie
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ight winning projects of the SA government’s risk mitigation power procurement programme were announced by energy minister Gwede Mantashe on March 18 2021. The programme was launched in 2020 to address continuing power supply challenges in SA. The fifth round of the renewable energy independent power producer programme (REIPPP) was referenced by Mantashe on the same day. He said the request for proposals (RFP) for the procurement of 2,600MW under the fifth round will close in August 2021, in the same month a sixth round of the REIPPP is expected to be announced. There has been broad acknowledgment that SA has to move towards an energy transition and the increased use of renewable energy, and that the country has been in dire need of a reliable and secure energy supply to help it out of its negative growth spiral. The challenges at Eskom
have led many to conclude that the country could not achieve stable economic growth without a reliable electricity supply. The announcement of eight successful bids and the opening of bids for the fifth round of the REIPPP is a long-awaited step in the right direction. The winning bids will deliver 2,000MW of power to the grid by August 2022 and must reach financial close by a non-negotiable date of July 31 2021. The power will be produced from a range of renewable energy sources including solar PV, liquefied natural gas (using power ships), wind and battery storage solutions, which will partly assist in addressing SA’s power supply challenges, aid in diversifying its power supply and help to tackle climate change.
THE LACK OF ACCESS TO POWER HAS HAD A SIGNIFICANT IMPACT ON THE PRIVATE SECTOR IN SA FOR SOME TIME
SA’s power supply challenges are significant and will impede much-needed economic growth for the country. Multiple actions, including inter alia possible industry restructuring, the implementation of the restructuring of Eskom, the facilitation of selfgeneration opportunities and the amendment of policy and regulation to keep abreast of technological advancements need to be urgently assessed to address our power supply challenges. Consumers need to have the ability to consider a broader range of supply options to ensure stability of supply, address environmental, social, and governance considerations and ensure greater certainty and visibility around tariff trajectories. Mantashe further stated the cap for self-generation power project licences would be lifted to 10MW of power. Power plants that produce above 10MW will still require a licence. The increase in the cap to 10MW is welcomed but falls well short of industry requirements. President Cyril Ramaphosa announced in October 2020 that, as part of his economic recovery plan for the
GETTING OFF THE GRID
/123RF — VACLAV VOLRAB country, 11,800MW of energy would be added to the grid by 2022, with more than half coming from renewable energy. He said the implementation of the country’s Integrated Resource Plan would be accelerated with increases in the generation of energy via renewable energy, battery storage and gas technology. He noted that agreements would also be finalised with independent power producers to produce more than 2,000MW of energy by June 2021. Further, he said the current regulatory framework would be reworked to facilitate new generation projects as well as to fast-track
applications for own-use generation projects. The issues were addressed by Mantashe on March 18, with just the selfgeneration cap of 10MW providing some disappointment for those who wanted the cap to be higher. The SA National Energy Association recently noted in the SA Energy Risk Report 2020 that clean energy could aid in SA’s economic recovery post pandemic. However, it said for the energy transition to take place, primary and associated infrastructure gaps should be addressed, and policy and legal frameworks must change, to facilitate the necessary invest-
ment in the sector. Announcing the winning bids, Mantashe said they would lead to private sector investment of R45bn, and that local content during the construction period would average 50%. Each of the projects has 50% SA entity participation, with 41% black ownership. The lack of access to power has had a significant impact on the private sector in SA for some time, and the developments announced by Mantashe, which are aligned with the global energy transition towards a clean and decentralised energy system, are to be welcomed. The work has just begun.
LABOUR PAINS
When decisions on unfair dismissal are wrong
T
he Commission for Conciliation, Mediation and Arbitration (CCMA) comes in for quite a bit of flak. Let’s face it, half of the parties in arbitration cases lose, and the CCMA and its commissioners are the easiest targets. In our experience, however, you normally pretty much get the arbitration award you deserve. But not always. There are indeed occasions when arbitration awards are wrong. That’s not unique to CCMA commissioners though. It is precisely for this reason that our legal system has a series of review and appeal processes, across all fields of law, not just employment dispute resolution channels. To be fair to CCMA and bargaining council commissioners, employer cases are often lost due to defects in how a disciplinary hearing was conducted by an employer. Training can go some way to reducing poorly applied internal disciplinary processes.
TONY HEALY That said, the CCMA can err in its judgments and be found to have committed irregularities in its arbitration awards. Such was the case in San Michele Home NPC v Mahlangu D & others (Case number JR1692/19), in a recently published labour court judgment. The background to this case was that on January 9 2019, “singing and dancing” union members had confronted an employer administrator “in his office and handed him a letter of grievances, and demanded that he should leave the premises. He was subsequently escorted out of the premises.” An unprotected strike then ensued, during which “employees who were not
party to the strike were equally subjected to intimidation by the striking employees”. The employer obtained a labour court interdict on an urgent basis on January 17 2019 in light of the strikers’ conduct. As is so often the case, “the unprotected strike and unlawful conduct had persisted”. “The employees were subsequently charged with and dismissed for intimidation, participating in an illegal removal of two employees (administrator and social worker) from the premises and insubordination. Thirty other employees who were members of the National Union of Public Service and Allied Workers (Nupsaw) were also dismissed for similar misconduct.” At arbitration, the commissioner held that the dismissal of the two employees for intimidation and the illegal removal of two employees was substantively and procedurally unfair on
grounds that (1) there was no evidence of intimidation, (2) the two employees allegedly evicted by the strikers had testified that they had “played along with the strikers in order to save themselves from potential if not actual harm”, (3) the alleged offenders had shown no intention of participating in the unprotected strike, and (4) that the two dismissed employees had long service and, in essence, acted out of fear of union member retribution if they did not act as they did. The employer took the arbitration award on review to the labour court. The judgment was scathing of the arbitration award. For example, the judgment notes that “the glaring evidence before the commissioner was that indeed the employees had not only participated in the unprotected strike action but were also positively identified as part of the employees who had also committed acts of misconduct”, continuing that
“further to these factors is that the employees were part of a mob that had unlawfully and in an intimidating and unconscionable manner removed officials of the applicant (a home for the mentally handicapped) who were going about their primary duties”. The judgment also noted that neither of the two dismissed employees had shown any form of contrition for their actions, or taken stock of the consequences thereof”. Turning to the arbitration award’s remedy of the reinstatement of the two dismissed employees, the labour court judge noted that “I fail to appreciate how the commissioner could possibly have concluded that a reinstatement with no
IT IS PRECISELY FOR THIS REASON THAT OUR LEGAL SYSTEM HAS A SERIES OF REVIEW AND APPEAL PROCESSES
consequence s was appropriate”. The judge was not finished. He continued that “having regard to the above and the overall approach of the commissioner, it is apparent that he clearly made contradictory findings, and other than that, he had relied on speculation rather than the discernible facts that were before him … the commissioner had misconceived the nature of the inquiry he was called upon to undertake, had completely ignored relevant evidence, had failed to properly apply his mind to material issues at hand and had committed various other irregularities in the conduct of proceedings”. The court substituted the arbitration award of the commissioner in holding that the dismissal of the two employees was substantively fair. ● Tony Healy is CEO at Tony Healy & Associates Labour Law Consultants, www.tonyhealy.co.za.
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BusinessDay www.businessday.co.za April 2021
BUSINESS LAW & TAX
Milestone for party funding transparency
PAPER TRAIL
act took a decade to get on the books but •willNew boost democracy and the power of voters Dario Milo, Tamryn Gorman & Gomolemo Tau Webber Wentzel
O
n April 1 2021, the Political Party Funding Act came into force. It marks a significant milestone in SA’s democracy, after a decade of urging by nongovernment organisations for the regulation of private donations. In 2005, the Institute for Democracy in Africa (Idasa) took the five major political parties to court to reveal their sources of funding in terms of the Promotion of Access to Information Act 2000 (Paia). The Western Cape High Court found there was no need for political parties to disclose their sources of funding as they are private bodies. In 2017, My Vote Counts challenged the constitutional validity of Paia on the basis that it did not make proper provision for citizens to gain access to particulars of the private funding of political parties. The Constitutional Court upheld its challenge. It declared Paia was unconstitutional in failing to provide for access to the information concerned, and it gave the National Assembly an oppor-
tunity to cure the defect within 18 months. As a result of the litigation, the National Assembly enacted the Political Party Funding Act, and it was signed into law by the president on January 22 2019. The objectives of the act are to: ● Provide for, and regulate, the public and private funding of political parties in particular; ● Establish and manage funds to finance represented political parties sufficiently;
WE BELIEVE THE ACT WILL GO A LONG WAY TOWARDS TRYING TO LEVEL THE PLAYING FIELD BETWEEN POLITICAL PARTIES ● Prohibit certain donations from being made directly to political parties; ● Regulate the disclosure of donations accepted; ● Determine the duties of political parties in respect of funding; ● Provide for powers and duties of the commission; ● Provide for administrative
fines; and ● Create offences and penalties. The act regulates direct donations made to political parties and does not allow them to accept direct donations of more than R15m from an individual or entity. Indirect donations made to the Electoral Commission of SA (IEC) are also permitted under the act. Money appropriated by an act of parliament or recovered by the IEC in terms of the act and interest from investments in terms of the act must be allocated by the Represented Political Parties Fund. Private donations received by the IEC must be allocated by the Multi-Party Democracy Fund. These allocations are made by the respective funds to political parties in national and provincial legislatures based on a proportional and equitable formula. The IEC is tasked with monitoring compliance with the act, assisted by various provisions in the Political Party Funding Act. For example, political parties must disclose the relevant information, including books, records, reports and other documentation needed for any investigation the IEC is conducting under the act. The
/123RF — SERGEY ILIN IEC may apply to the electoral court for an order to direct parties to comply and for administrative fines to be imposed. The IEC is developing an online disclosure system which will allow political parties and donors to make disclosures electronically. The IEC’s powers to enforce compliance include: ● Withholding the distribution of funds from the Represented Political Party Fund and Multi-Party Democracy Fund; ● The recovery of money irregularly accepted or spent; and ● Imposing administrative fines (via the electoral court). We believe the act will go a long way towards trying to level the playing field between political parties, providing greater transparency to the public on the inner workings of political parties, forcing political parties to be more accountable to the public, and hopefully
instilling voters with more confidence. Ultimately, it will mean voters will know who is making large donations to which political party and they can then factor that into their decision to vote. However, the act has certain limitations: ● Companies that donate to the Multi-Party Democracy Fund may request that they and the amount of their donation remain anonymous; and
THE IEC IS TASKED WITH MONITORING COMPLIANCE WITH THE ACT, ASSISTED BY PROVISIONS IN THE POLITICAL PARTY FUNDING ACT ● Small, private donations remain unregulated, because a juristic person and political party are only obligated to disclose donations of more
than R100,000 from a single source. Only juristic persons have the duty to disclose a donation of more than R100,000 to the IEC, not natural persons. That means a rich businessman who makes a donation does not have to disclose it but a company will have to. Although the political party would still have to disclose the businessman’s donation, it would be better if the disclosure was made by both parties. The definition of “donation in kind” includes the provision of services for the use or benefit of a political party other than on commercial terms. “Commercial terms” is not defined and could give rise to potential loopholes. We believe the Political Party Funding Act is a large step in the right direction. Inevitably, some loopholes are present but, in the main, this is legislation that is critical for our democracy and should be welcomed.
Clarification of merger control thresholds Shawn van der Meulen & Elisha Bhugwandeen Webber Wentzel The Comesa Competition Commission has published a new practice note clarifying important aspects of its merger control thresholds. Practice Note 1 of 2021 clarifies the application of the term “operate” under the Comesa Competition Regulations, 2004 and the Comesa Competition Rules, 2004, as well as its approach to the application of Rule 4 of the Rules on the Determination of Merger Notification Thresholds and Method of Calculation. The Comesa Competition Commission has advised that
merger parties should only be referring to Rule 4 of the Merger Threshold Rules set out below: “Any merger where both the acquiring firm and target firm, or either the acquiring or the target firm, operate in two or more member states, shall be notifiable if: a) The combined annual turnover or combined value of assets, whichever is higher in the common market of all parties to a merger equals to or exceeds $50m; and b) The annual turnover or value of assets, whichever is higher, in the common market of each of at least two of the parties to a merger equals or exceeds $10m, unless each of the parties to a merger
achieves at least two-thirds of its aggregate turnover or assets in the common market within one and the same member state.” The Practice Note clarifies that Rule 4 should be applied cumulatively and that all the criteria below should be satisfied: ● The regional dimension test — the merging parties must operate in at least two Comesa member states. There are three alternative scenarios under which merger parties can operate in member states namely: i) Both the acquiring firm and target firm can operate in at least two member states. ii) The acquiring firm can operate in at least two mem-
ber states, while the target firm can operate only in one member state. iii) The target firm can operate in at least two member states, while the acquiring firm can operate only in one member state. ● The combined turnover or asset value test — either the combined annual turnover or
THE ISSUING OF THE PRACTICE NOTE ADDRESSES MANY OF THE QUERIES RAISED BY MERGER PARTIES AND THEIR LEGAL REPRESENTATIVES
combined annual assets in the common market of all the parties to the merger equals to at least $50m. The option to use combined annual turnover or combined annual asset shall depend on the higher amount of the two total values. ● The individual turnover or asset value test — the annual turnover or annual asset, whichever is higher, of each of at least two of the parties in the common market is at least $10m. Whether to use annual turnover or annual assets depends on the higher of the two. It should also depend on the measure (turnover or asset) used in the combined turnover or asset value test.
● The two-thirds exemption rule — the two-thirds exemption rule must be read in conjunction with the preceding tests. For both the combined and individual thresholds requirements, it is the higher value of the turnover derived or asset value held which must be considered. The two-thirds rule is meant to apply once the higher value has been established. The issuing of the Practice Note is welcomed and addresses many of the queries frequently raised by merger parties and their legal representatives. The Practice Note will assist merger parties apply the merger control rules pragmatically and with increased certainty.
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BusinessDay www.businessday.co.za April 2021
BUSINESS LAW & TAX
Work injuries: who is liable?
• An employer has protection, but it is not a blanket indemnity Pareen Rogers & Naa’ilah Abader ENSafrica
T
he Compensation for Occupational Injuries and Diseases Act, 1993 (Coida) provides for compensation for disablement caused by occupational injuries or diseases sustained or contracted by employees in the course of their employment, or for death resulting from such injuries. Section 22(1) of Coida provides that if an employee has an accident resulting in their disablement or death, the employee or their dependants will, subject to the provisions of Coida, be entitled to the benefits provided for and prescribed in Coida. An “accident” for the purposes of Coida is defined as “an accident arising out of and in the course of an
employee’s employment and resulting in a personal injury, illness or the death of the employee”. Section 35(1) of Coida protects an employer against liability for damages in respect of occupational injuries and diseases to which Coida applies. The Supreme Court of Appeal (SCA) in Churchill v Premier, Mpumalanga recently had to determine whether the premier of Mpumalanga’s liability was excluded by section 35(1) of Coida. In this case, Catherine Churchill sued the premier and the director-general in the office of the premier, alleging that an injury she had sustained was occasioned by their negligence. Churchill claimed about R7.5m for past and future medical treatment, general damages and past and future loss of income. The premier and the
director-general raised a special plea contending that Churchill’s claim constituted an occupational injury for which she was entitled to compensation in terms of Coida section 35(1), which protected the premier and the director-general against any liability in the circumstances. Churchill’s claim arose from the following facts: She was employed by the premier as its chief director: policy and research. During the morning of April 5 2017 a protest over labour issues organised by the National Education, Health and Allied Workers’ Union, occurred at the premises and in the building where Churchill worked. The demonstration was meant to take place outside the premises, but certain employees used their access cards to enter the premises. While Churchill was in a office, three colleague’s
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FOLLOW THE RULES
/123RF — CONVISUM demonstrators entered the office, asked who was there and left without an answer. Churchill followed them to return to her office and discovered that it was locked. In frustration she swore and a man in the passage asked her what she had said. She apologised and tried to explain, but this individual regarded the expletive as being directed at the demonstrators and shouted at her demanding to know why she had sworn at them. Churchill was shouted at repeatedly and the man followed and shouted at her: “We’re coming for you!” About 20 protestors then marched towards the office. Churchill tried to hide behind the door and phoned her husband asking him to come and fetch her. The protestors found her behind the door and one of them tried to take her cellphone. He also tried to pick her up. Churchill’s colleague attempted to phone the director-general’s office and the security office for help, but no assistance was forthcoming. Churchill was carried out of the office and up two flights of stairs by the protestors and she was called “a piece of white s**t”. Once Churchill had been carried to the foyer she was put down in the middle of the crowd of protestors and her shoes removed. People in the crowd pushed, shoved and punched her, while jeering and shouting “voetsek” and “get out”. Then she was chased out of the building and left to make her way to the entrance where her husband had arrived to collect her. Churchill’s husband had heard everything because she had kept her cellphone on throughout the incident. The entire ordeal lasted 45 minutes. Churchill suffered physical injuries in the form of bruises, scratches and a swollen foot. As a result of being shocked and
humiliated, she also suffered psychiatric injury that has left her with post-traumatic stress disorder. Churchill alleged that she found the situation intolerable and was compelled to resign at the end of June 2017. In determining whether the premier and directorgeneral were protected from liability in the circumstances, the SCA considered the following key issues: “Did this incident arise out of Churchill’s employment so that her injuries, both physical and psychiatric, were sustained in an accident for the purposes of Coida? It was accepted that because it happened at her place of employment and while she was going about her duties it arose in the course of her employment. “Did it arise out of her employment? In other words, was it sufficiently closely connected to her employment to have arisen from it? The fact that it occurred in her workplace when she was going about her duties is undoubtedly a factor that connected it to her employment. In that sense her employment brought her within the zone of risk, but that is merely where the inquiry commences. “Was the risk also incidental to her employment?” The SCA found that the purpose of Coida is to compensate for occupational injuries and disease. While longstanding authority dictates that social legislation of this type is given a generous construction, it is not directed at providing compensation and exempting employers from liability for injuries and diseases that are only tenuously and tangentially connected to the duties of the employee. Had this been the case, Coida could simply provide for compensation for all and any injuries or illnesses sustained when at work or when working.
The SCA confirmed that in cases of this nature there is no bright-line test and the inquiry is always whether the statutory requirement that the accident arose out of the person’s employment, as well as in the course of that employment, is satisfied. A court must accordingly analyse the facts of a matter closely to determine whether an accident arose out of a person’s employment. The SCA ultimately concluded with reference to these facts that the only connection between the incident and Churchill’s employment was that she was at work at the time. The incident did not relate to her duties and she was not assaulted because of the position she held or because of anything she had done in carrying out her duties, or for any reason related to the protest. Her injuries therefore did not arise out of her employment, section 35(1) of Coida did not apply and the premier was accordingly liable to compensate her for damages. The matter was remitted to the high court to determine the quantum of the damages.
LESSON TO BE LEARNT
This case illustrates that employers will not always be shielded from liability in terms of section 35(1) of Coida, particularly within the context of workplace demonstrations and industrial action, and steps should be taken to protect employees in such circumstances. A blanket reliance on section 35(1) of Coida by employers is not an approach that our courts will easily accept. In this case, the SCA found that an assault in the workplace is not something that ordinarily arises and/or is incidental to an individual’s employment and, to use the words of the SCA (and judge Wallis in particular), “in simple language, they are not things that ‘go with the job’”.
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BusinessDay www.businessday.co.za April 2021
BUSINESS LAW & TAX
Rwanda gets a new code to lift investment
COLOURS OF KIGALI
Changes are geared to attracting businesses and •making Kigali a regional financial hub Dieudonné Nzafashwanayo ENSafrica Rwanda
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ffective from February 8 2021, Rwanda has a new law bringing about a set of new investment incentives, mainly geared at enhancing Rwanda’s competitiveness and attracting cross-border investments, new businesses and financial institutions to operate across the African continent and beyond through the newly set up Kigali International Financial Centre. The new law is number 006/2021 of 05/02/2021 on investment promotion and facilitation (New Investment Code) and it repeals 06/2015 of 28/03/2015, which had been in force since 2015. The first striking change under the new investment code relates to new priority economic sectors such as mining activities relating to mineral exploration; construction or operation of specialised innovation parks or specialised industrial parks; transport, logistics and electric mobility; horticulture and cultivation of other highvalue plants included on the list approved by the Rwanda Development Board; creative arts in the film industry; and skills development in areas where the country has limited skills and capacity as
determined by the Rwanda Development Board. Another important change relates to varied tax incentives that have been introduced. These include: ● A preferential corporate income tax rate of 3% applicable to pure holding companies, investment special purpose vehicles, collective investment schemes, on foreign-sourced income of an investor operating as a global trading or paper trading, and on foreign-sourced royalties of intellectual property companies meeting the conditions set out under the code;
HOWEVER, THE COUNTRY EQUALLY ALSO NEEDS TO KEEP ITS FOCUS ON OTHER INVESTMENT LOCATION DETERMINANTS ● Tax incentives for entities established by philanthropic investors which include nonrecognition as revenue of grants and funds transferred to the philanthropic entity for the purposes of financing its social impact activities; 0% VAT rate on the goods and services procured locally by the entity and exemption from employment income tax of the expatriates
employed by the entity provided they do not exceed 30% of the employees of the entity as well as a refund of social security contributions paid to the Rwanda Social Security Board on permanent departure of the expatriates from Rwanda. ● A preferential withholding tax rate of 5% on dividends and interest paid on securities listed on the Rwanda Stock Exchange. A similar incentive already exists under the Income Tax Law, but it is only limited to dividends and interest whose beneficiaries are Rwandan and/or East African Community residents. ● A preferential withholding tax rate of 10% on interest paid on foreign loans, dividends, royalties and service fees, including management and technical service fees by specialised innovation park developers or specialised industrial park developers. ● Exemption for angel investors investing a maximum $500,000 in a start-up from capital gains tax upon the sale of shares, provided the shares were initially purchased as a primary equity issuance by the start-up, and from withholding tax applicable to dividends up to five distributions by the start-up. ● Tax incentives to investors in the film industry meeting the requirements under the new investment code. Those
/123RF — FRANCISCO DE CASA GONZALEZ incentives include a 0% VAT rate on the goods and services procured locally and a preferential withholding tax rate of 0% on payments made for specialised services procured by the investor. A list of the qualifying foreign specialised services is jointly approved by the Rwanda Film Office and the Rwanda Revenue Authority. Another interesting feature of the new investment code (which was provided for under the 2005 investment code) is that in addition to the incentives set out in the law, special incentives can be provided to strategic investment projects (ie investment projects of national importance, which have a strategic impact on the development of the country and meet other requirements set out under the code). Strategic investment projects that meet qualifying criteria and corresponding additional investment incentives are approved by the cabinet upon proposal by the Private Investment Commit-
tee (a committee established by the new code), whereafter an agreement to that effect is negotiated and entered into between the registered investor and the government. The change revived by the new law allowing the cabinet to grant additional incentives is quite timely given that ad hoc incentives previously granted by the government in absence of a specific legal statute have sparked con-
ONE WOULD EXPECT TO SEE MULTINATIONALS CHOOSE RWANDA AS THEIR HOLDING JURISDICTION FOR EXPANSION tention, with the Rwanda Revenue Authority refusing to recognise such incentives on the ground that they are not provided for by the law as required by the constitution. The new investment code
provides for several tax and nontax incentives, and one would have no trouble concluding that it contains what it takes to attract the location of internationally mobile production factors in Rwanda, and one would expect to see a number of multinationals choosing Rwanda as their holding jurisdiction for expansion in other African countries. However, the country equally also needs to keep its focus on other investment location determinants such as infrastructure, the macroeconomic environment, a predictable tax system, goods market efficiency, labour market efficiency, technological readiness and innovation. In that way, the country of a thousand hills could expect to see deployed investments and sacrifices made in terms revenues collection generate commensurate development benefits. Reviewed by Fred Byabagabo, a partner at ENSafrica Rwanda.
Judgment clarifies fair labour practice issue Sandile July & Nyiko Mathebula Werksmans The Labour Court judgment in Botes v City of Joburg Property Company SOC Ltd and Another [2021] 2 BLLR 181 (LC) put it beyond doubt that issues which fall under section 23 of the Constitution, the right to fair labour practices, are governed by the principles of procedural and substantive fairness. Furthermore, the court indicated that such issues are primarily dealt with through the Labour Relations Act 66
of 1995 (LRA). Therefore, when dealing with a dismissal dispute or unfair labour practice the question should be whether the alleged conduct sought to be impugned was procedurally and substantively fair, not lawful. In the Botes matter, the issue was whether the decision of the board of the City of Joburg Property Company (CJPC) to place Botes on precautionary suspension pending a disciplinary process was unlawful and stood to be set aside. Botes alleged that the CJPC did not have the
powers to place her on suspension and even if it did, the necessary jurisdictional facts to exercise such powers were absent. This raised a question of the jurisdiction of the Labour Court. Moshoana J remarked that the Labour Court is a creature of statute which derives its powers from the LRA and any other law that gives it jurisdiction. Moshoana J stated that if the legislature wished to clothe any of the labour dispute resolving bodies, including the Labour Court, with powers to entertain the law-
fulness of a suspension it could have said so. This is a view informed by Steenkamp and others v Edcon (Numsa intervening) (2016) 37 ILJ 564 (CC). The principle drawn from Steenkamp is that where an employee alleges
WHERE AN EMPLOYEE ALLEGES UNLAWFULNESS AND NOT UNFAIRNESS, THE LABOUR COURT LACKS JURISDICTION
unlawfulness and not unfairness, the Labour Court lacks jurisdiction. The other noteworthy point from Botes is that a breach of an employment contract should not be confused with unlawfulness. Should an applicant wish to claim breach then same should be brought in terms of section 77(3) of the Basic Conditions of Employment Act 75 of 1997. The court made it clear that breach cannot be equated to unlawfulness. The court further stated that it would have been
inappropriate for it to assume jurisdiction where the LRA provides that unfair suspension disputes are justiciable under section 191 by the CCMA or bargaining council. This is relevant because Botes’ case was in essence an unfair suspension dispute as contemplated by section 186(2)(b) of the LRA. Therefore, she could have pursued her claim at the CCMA in terms of section 191(1)(a)(i) and (ii) read with section 191(5)(a)(iv). However, she disavowed those remedies and suffered the consequences.
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BusinessDay www.businessday.co.za April 2021
BUSINESS LAW & TAX
Keeping workat-home staff off the couch
IN THE HOUSE, ON THE CLOCK
spurs new working trends, companies •turnAstoCovid-19 invasive technologies to monitor employees Keketso Kgomosotho Baker McKenzie, Johannesburg
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he Covid-19 pandemic has accelerated (and for some, cemented) the work from home (WFH) trend which was limited to a handful of forwardthinking companies before. According to research from Slack, 72% of employees who work from home wish to continue with some form of hybrid model, even after the pandemic. Even with a vaccine rollout, many businesses are still far from going back to the analogue workplace in a way resembling the old normal, and many businesses have abandoned the concept of a physical workplace altogether. In a world that often rewards presenteeism, however, this trend introduces a new threat to employers’ and managers’ sense of control over employee productivity. As a result, many employers across the globe are turning to employee monitoring technology to replace the physical employee oversight once applied in the office. No employer wants to pay someone to watch TV, or scroll through their social media while lying on the couch during work hours. Our IT friends tell us employers have been monitoring employees in the workplace for a long time
through CCTV, biometric clock-in systems and internet and telephone use, for example. Recent developments have produced technology to monitor employees in the home setting too. The growing suite of surveillance technology available to employers offers everything from allowing employers to view login times, measure keystrokes, track live locations, monitor and track internet, e-mail and video, and take screenshots of desktops through the day.
OUR IT FRIENDS TELL US EMPLOYERS HAVE BEEN MONITORING EMPLOYEES IN THE WORKPLACE FOR A LONG TIME Employers have many legitimate reasons for monitoring employee activity, including managing productivity, securing information in modern networked enterprises, enforcing company policies, controlling quality, protecting employees’ safety and securing business assets. However, the decision to monitor employees in such ways is not without ethical and legal complexities. In SA, the monitoring and interception of communica-
tions is governed by the Regulation of Interception of Communications and Provision of Communication Related Information Act, 2002 (Rica). The default position in terms of the act is that all workplace monitoring and interception is prohibited, unless it falls within one of the exceptions left open in chapter 2 of the act. Thus, employee monitoring is permitted: ● Where the employee consents or where their consent can be reasonably implied; ● Where the interception occurs in connection with the carrying on of business (the business exception); or ● Where interception is carried out by a person who is a party to the same communication. Often the decision an employer must make is whether to base their approach on prior written consent in terms of section 5, or the business exception at section 6 where written consent is not required, or a combination of both. Most employers ensure they have the prior written consent, which may be obtained in employment contracts. Those agreements may also include reference to the processing of personal information and interception of communication. For those situations where something falls through the cracks — where the employer has written consent for
/123RF — ALEXANDER SHATILOV some, but not all, reasons for intercepting and monitoring, or where the employee has not secured consent from all staff members — the employer may have recourse to the business exception in section 6. This provision acts as a catch-all exception for employee monitoring that occurs in connection with the carrying on of a business. It does not require written consent, and is sufficient to justify the monitoring and interception of communication in connection with business operations. Once employee communication has been intercepted, employers can expect that the data they obtained will invariably be subject to the protection of both the Protection of Personal Information Act (Popia) and the constitution, both of which must be fully considered when planning to monitor employees in a home setting. The implementation of the substantive data protection and privacy provisions of Popia during 2020 ensured that data subjects in SA now have an array of additional data privacy rights. It brought with it the creation of new civil remedies, empowering data subjects to bring claims against employers for their personal information on a strict liability basis. With only a few months left of the Popia’s grace period, it is in the employer’s interest to ensure full compliance.
Thus, from a Popi compliance perspective, employers must be prepared to: ● Implement a monitoring policy for employees, with the aim of informing them of the types of monitoring (for example, covert, continued, one-off or occasional); ● Implement the use of appropriately worded consent forms, which the employer would sign whenever consent is required. Specific reasons for the processing must be provided (for example, where employee monitoring will take place as a result of a new work from home policy); ● Inform employees of the methods of monitoring and the circumstances under which it will be conducted (typically to investigate allegations of misconduct); ● Implement measures to ensure the confidentiality of the data, and that processing complies with the Popia; employer’s ● Implement communication and awareness training programmes for existing and new employees; and at the induction of new employees. The boundaries between our professional and personal spaces were already rather blurred before work from home became trended, and those lines have only become less visible. The new normal has already resulted in a shift in employee-employer relations, with staff having to work around additional
child-care obligations, athome distractions, grief and other straining factors — each requiring a more empathetic approach from employers. Thus, it is best to tread prudently; if the employer’s aim is to assure productivity within the workplace, then it might be enough to simply use software that analyses the amount of time spent on a given website or programme to ensure staff are working instead of playing. To the extent that the monitoring technology does not capture personal data such as passwords or banking details, and only tracks the employee during working hours, there should be no infringement on data privacy rights. Data gathered from employee monitoring programmes could be useful in managing employee underperformance, and identifying and remedying employee misconduct, especially when physical oversight and supervision are not possible. To ensure a sound employee relations environment, it is critical to have a clear plan for managing employee concerns about unwarranted infringements of privacy, abuse of personal data and consequences. This article was overseen by Johan Botes, Partner and Head of the Employment & Compensation Practice at Baker McKenzie, Johannesburg.
Watch out when choosing trademark words Janine Hollesen Werksmans In the case of Swatch AG (Swatch SA) v Apple Inc, in the Supreme Court of Appeal, Swatch, the owner of the SWATCH trademark, had opposed the registration of the IWATCH trademark filed by Apple. The high court dismissed Swatch’s opposition which it then appealed to the appeal court. Swatch argued its SWATCH mark and the IWATCH mark are confusingly similar that there would
be a likelihood of deception or confusion. The enquiry was concerned with whether IWATCH was confusingly similar to SWATCH. Apple argued that the likelihood of confusion was substantially diminished by its longstanding established brand with a family of i-prefixed trademarks and that these products and services gained popularity around the world and in SA. A consumer who would encounter an Apple product with the i-prefix would recognise the product as part of the Apple
i-prefix family of products. To determine whether the two marks were deceptively or confusingly similar, the appeal court considered the visual, aural and conceptual similarities of the marks; how the marks would be perceived by the average consumer; and the degree of similarity of the goods in relation to the degree of similarity of the marks. Swatch argued that both marks consist only of words, having no logos or other distinguishing matter, both contain the common element
“WATCH” preceded by a single letter prefix which presented the only visual difference and the marks sounded the same. The appeal court confirmed that as both marks use
CONSUMERS WOULD BE MORE CONCERNED WITH THE BRAND OF WATCH THEY WANTED TO PURCHASE
the common element “WATCH” a visual similarity was created,. but stated that where marks contain a descriptive word, emphasis must be placed on the prefix. The court held that the prefixes of each of the marks are the visual differentiators and which differentiated the marks from one another. It was further stated that it is not the purpose of trademarks or copyright to secure monopolies over descriptive words which have obvious relevance to the goods for which they are to be regis-
tered. A further factor taken into account was that consumers would be more affluent and would be more concerned with the brand of watch they wanted to purchase and would be less likely to be deceived or confused by the limited similarities between the marks. This case illustrates the difficulties in enforcing rights in descriptive words which are incorporated in trademarks and that care should be taken when choosing trademarks which include such words.
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BusinessDay www.businessday.co.za April 2021
BUSINESS LAW & TAX
Ad blokes not woke no joke
Toxic masculinity in lager advert •criticised by advertising regulator Liézal Mostert ENSafrica
I
n a TV advert two blokes are on a video call (yes they should be in a bar, but these are not normal times). They’re having one of those deep male conversations. Bloke One: “Hey where are you?” Bloke Two: “Just grabbing a beer, man.” Bloke One: “Better be a real one. Remember when you asked for this?” As he says this, Bloke One holds his thumb and forefinger some 5cm apart. Then we see a visual of that earlier time when Bloke Two ordered a beer while doing the thumb-and-forefinger5cm-apart thing, during which he also uttered the apparently controversial words “Can I have a lime with this?” To which an agitated Gerard Butler responded, saying “Hey, that’s a Windhoek, that’s 100% pure beer you don’t need any … lime.” As he said this a suitably chastened Bloke Two took a
FIT-IN CULTURE
the Code of Advertising Practice, including clause 3.5 of section II (unacceptable advertising – gender).
WHAT HEINEKEN HAD TO SAY
sip of his beer and clearly enjoyed it. To which nowsatisfied Gerald Butler responded with a “Keep it real, Joe.” So, in short, we’re talking about a TV advert for Windhoek beer that tells you not to add lime to your beer. An advert that features famous actor Gerard Butler (who’s seen as quite macho) and, as Bloke Two, a person who’s neither famous nor macho, but there will be some more detail on him later. An advert that has that sparkling dialogue you read earlier – all that’s missing there is a load of “boets”, but it might be that the scriptwriters thought that Butler (who’s from Scotland) might have struggled with that little South Africanism.
Heineken argued that the point of the advert was to get the message across that Windhoek is 100% pure. There is, said Heineken, nothing wrong with suggesting you shouldn’t add lime to your Windhoek because the product does not need any flavouring. There’s no offence or shame in the advert because Bloke Two in fact realises he likes Windhoek without lime. And Gerard Butler is not discriminating against women.
THE RULING
The directorate saw things differently. It found the advert breached clause 3.5 of section II. What follows is some of its reasoning: ● A depiction of a macho world. “The directorate understands the basis of the discomfort. complainant’s While it is never spelt out there is an undertone of real men drink real beer.” This comes from the “masculine interactions and the all-male cast; it is almost impossible to
THE OBJECTION
An individual, Aadila Agjee, filed a complaint with the South African Advertising Regulatory Board (ARB). She claimed the advert was offensive and belittled people (particularly women) for their personal preferences. She cited various provisions of
imagine a woman teasing her friend for ordering a lime slice with the beer, or insisting that her friend order real beer”. There is “unspoken dialogue”, which is further emphasised by the use of Butler, an actor associated with macho movie roles, and by the use of the words Keep it real, Joe.” This is in contrast with Bloke Two, a “gentle-looking red-headed man – two characteristics that might typically make him a target for teasing in a toxic environment”. ● A lack of humour. “It is a completely serious communication, the unavoidable outtake of which is that real men drink real beer.” ● A depiction of a fit-in culture. The directorate was “disturbed by the ‘fit-in’ culture communicated by the commercial; not only is the character publicly shamed and belittled about his
IT IS EXACTLY THE UNSPOKEN NATURE OF THE COMMUNICATION THAT MAKES IT PARTICULARLY DANGEROUS
request for a lemon or lime in his beer, but he is also still being teased about it after the fact”. ● The implicit nature of the message. The advert never says “real men drink real beer”, it simply implies it: “The reality is that it is exactly the unspoken nature of the communication that makes it particularly dangerous – the gender stereotype portrayed as so normal that it does not even require explanation.” ● Toxic masculinity. “It is the entrenchment of the role of men as having to behave in a certain way with which the Directorate takes issue. It is also the entrenchment of male behaviour that is bullying, and what has come to be labelled as ‘toxic masculinity’.” The advertisement, rather than drawing attention to the purity of the taste of their product, paints a clear picture of an aspect of the target market: stereotyped macho male “who buckles to the pressure of his peers to fit in”. PC (woke even) or a judgment that reflects the values of 21st century SA? You decide. Reviewed by Gaelyn Scott, Head of ENSafrica’s IP department.
VAT facts for foreign firms with SA activity Riette Lombard AJM Tax Uncertainty often exists whether a foreign business with supplies to SA customers is required to register as a value-added tax (VAT) vendor in SA. The implication of the SA Revenue Service’s (Sars’s) literal interpretation of the relevant provisions and a recent high court decision on the matter will likely negatively impact foreign investment into SA, and disincentivise foreign businesses from doing business with SA customers by virtue of their potential VAT risk. A VAT registration obligation exists for any person who conducts an “enterprise” and exceeds the VAT registration threshold. Section 1(1) of the ValueAdded Tax Act, No. 89 of 1991 (VAT Act) defines “enterprise” to mean any enterprise or activity conducted continuously or regularly in or partly in SA and in the course or furtherance of which goods or services are supplied to any other person for consideration. Proviso (ii) to the definition of “enterprise” provides that any main business or branch
of a foreign business that is permanently situated outside SA, that is separately identifiable and maintains an independent accounting system, is deemed to be carried on by a separate person. Any supply of goods or services by the local branch to the foreign main business is deemed to be a supply made by the local branch in the course of its enterprise in terms of section 8(9) of the VAT Act.
SARS INTERPRETATION
For a number of years, it has been generally accepted that a separate identifiable local branch with an independent accounting is deemed to be carried on separately from the foreign main business, even when the local branch only performs certain functions for its foreign main business. In these circumstances, the local branch would register as a vendor (as opposed to the foreign main branch) and account for VAT on its supplies to the foreign main branch. Recently, Sars indicated that where the local branch only makes supplies to its foreign main business, the local branch is not conducting an enterprise and may
thus not register as a vendor. The Gauteng high court recently considered the application of these provisions and found in favour of Sars in the unreported judgment of Wenco International Mining Systems Ltd and Another v The Commissioner for the South African Revenue Services (case no 59922/2019). Both the first and second applicant are incorporated in Canada, with the second applicant being registered as a branch of the first applicant in SA. The first applicant supplies management systems software, maintenance, safety and machine guidance to the mining industry across the world. The second applicant renders services such as training, system support, site visits and installation to SA and other African clients of the first applicant, for and on
MOST FOREIGN JURISDICTIONS HAVE INCORPORATED A FORM OF VAT RELIEF INTO THEIR LEGISLATION
behalf of the first applicant. The first applicant pays the second applicant a management fee for the services supplied to the first applicant. The first and second applicant submitted a ruling application requesting Sars to confirm that the second applicant (local branch) should register for VAT as opposed to the first applicant (foreign main business) and account for VAT at the zero rate on the services rendered to the first applicant. Sars issued a ruling providing that the first applicant is conducting an enterprise and must register as a VAT vendor in SA and charge VAT on the supplies to its customers (at either the standard or the zero rate). Sars provided that for the local branch to satisfy the general definition of “enterprise” as a separate person from its foreign main business, the services are required to be supplied to any other person for consideration. Sars further provided that the second proviso to the definition of “enterprise” in section 1(1) never intended to create a situation where a branch is registered or required to register in SA
purely for supplies it makes to its business permanently situated outside SA. Upon review of Sars’s decision, the court considered the business structure and geographical arrangement between the applicants and found that the second applicant’s alleged enterprise consisted solely of the services supplied to the first applicant, which are supplied for the operation of the first applicant’s business. The second applicant cannot be separately identified from the first applicant and is not is not engaged in an enterprise in which it makes supplies to the end-clients. The court concluded that proviso (ii) to the definition of enterprise is not applicable to the second applicant and confirmed that section 8(9) presupposes the existence of an “enterprise”.
IMPLICATIONS
Most foreign jurisdictions have incorporated a form of VAT relief into their legislation to ensure nonresident businesses may recover the VAT incurred for purposes of their business activities in the foreign jurisdiction. The VAT Act does not explicitly make provision for
such relief. Similar relief may and has previously been achieved by foreign businesses by applying proviso (ii) to the definition of “enterprise” and section 8(9) of the VAT Act. It appears the court’s conclusions are premised on the fact that the second applicant was not conducting an enterprise in SA. The question is posed whether Sars and the court would have concluded differently — that is, that proviso (ii) to the definition of “enterprise” and section 8(9) was applicable, if the local branch was already conducting an enterprise in SA by virtue of it making other supplies to local customers for which it received consideration. If this is the case, the current interpretation issue may be circumvented to ensure the foreign business does not obtain a VAT registration obligation. A foreign main business that conducts business in SA through a local branch should be aware of Sars’s interpretation of the provisions. It appears the local branch’s activities and supplies should be distinguishable from the foreign main branch to rely on proviso (ii) to the definition of “enterprise”.
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BusinessDay www.businessday.co.za April 2021
BUSINESS LAW & TAX
Treasury aims to broaden exit-tax ambit
EVERYONE WANTS A PIECE
Proposal in budget for inclusion of SA retirement •funds of emigrants in the net of taxable assets Joon Chong & Wesley Grimm Webber Wentzel
T
he 2021 budget includes a proposal for a deemed retirement withdrawal tax on retirement assets of emigrants as an exit tax. The proposal is unclear and involves many issues. Data from various sources suggests that about 23,000 SA tax residents emigrate each year in search of greener pastures. Individuals who cease to be tax residents currently pay an exit tax on their worldwide assets, with certain exclusions. At present, immovable properties and retirement funds that remain invested in SA are excluded from the exit tax net. The Treasury proposes in the budget to include SA retirement funds of an emigrant in the net of assets that are subject to exit tax. Emigrants will be deemed to have withdrawn from their retirement funds in full on the day before they cease to be SA tax residents which will result in a deemed retirement withdrawal tax (RWT). There is no effective date mentioned in the budget. The purpose of the proposal is to address the loss to
the fiscus when an individual has emigrated to become tax resident in another country, such as the UK. The double tax agreement (DTA) between SA and the UK provides for the UK to have sole taxing rights on the SA pensions and annuities of the emigrant. This means the SA pensions and annuities received by the emigrant who has become UK tax res-
THE EMIGRANT IS NOW TAX RESIDENT IN A COUNTRY WHICH HAS SOLE TAXING RIGHTS ON THE SA PENSION AND ANNUITIES ident would not be subject to tax in SA, only in the UK. Other countries with similar sole taxing rights in their DTAs with SA include Australia, New Zealand, People’s Republic of China, Hong Kong, Denmark, Germany, Italy, Portugal and Spain. Treasury proposes that payment of the RWT plus interest “will be deferred until payments are received from the retirement fund or as a result of retirement”. This proposal is unclear
but appears to suggest that the RWT plus interest will be withheld against actual payments received by the emigrant in the future from the retirement fund. (An actual payment could be received due to an allowed pre-retirement or retirement election, a divorce settlement or on death.) The proposal then continues to state that “[A] tax credit will be provided for the deemed retirement withdrawal tax as calculated when the individual ceased to be a South African tax resident.” This proposal is also unclear. The emigrant is now tax resident in a country which has sole taxing rights on the SA pension and annuities. SA has no right to tax the pension and annuities. There is no SA tax to credit against. Some DTAs provide for SA and the new country of residence both to have taxing rights on the SA pension and annuities. These countries include Canada, the US, Netherlands, Singapore, Qatar, Mauritius, Kuwait, United Arab Emirates, Saudi Arabia, Sweden and Switzerland. This usually means that the SA pensions and annuities will be subject to tax here as normal, and any SA tax paid is a credit against any tax
/123RF — BRIAN JACKSON due in the new country of residence. If SA has not lost the right to tax the pensions and annuities in the DTA, then there is no need for the RWT in the first place. If the retirement assets grow at a consistent rate, there would be higher amounts of tax to be collected by the South African Revenue Service on retirement or when paid on death or divorce after emigration. There is no loss to the fiscus. Capital gains, interest and dividends on retirement funds are not subject to South African tax in the hands of the retirement funds. This is based on the policy that the funds should be allowed to grow their asset base as much as possible to provide maximum value on retirement when such amounts are taxed. The proposal will erode the asset base with a deemed interest on the RWT. This could be interest accruing over long periods until retirement. A significant portion of the retirement funds of the emigrant would not be used for retirement but to pay the RWT and interest. This runs
counter against the policy to encourage retirement savings in SA generally. What happens if the RWT plus interest exceeds the value of the retirement assets on retirement? This could be due to the “associated interest” on the RWT or a significant decline in value of the retirement funds after emigration. On retirement, the emigrant would have to pay the shortfall in RWT and interest and would have nil value remaining as pension or annuities. The mutual agreement procedure (MAP) is a remedy in a DTA for the revenue authorities of both countries (eg Sars and HMRC) to interact with each other to resolve international tax disputes. Where there is foreign tax imposed on foreign income, an SA tax resident can claim the foreign tax as a credit against SA income tax if the foreign tax is validly imposed. A foreign subsidiary may deduct withholding taxes against fees paid to an SA parent entity in terms of their tax rules. We have seen Sars disallowing the foreign tax credit claimed by the SA par-
ent entity on grounds that the withholding taxes were not validly imposed in terms of the DTA. In our example above, if the HMRC holds the view that the RWT plus interest cannot be validly imposed in terms of the UK/SA DTA, there could be double tax on the SA pensions and annuities received by the emigrant. The HMRC would not give a credit for the RWT plus interest against any UK income tax due. A possible remedy for the emigrant would be to refer the issue to MAP and for the HMRC and Sars to discuss the validity of the RWT plus interest. This could take years to resolve. In the interim, the UK retiree would be without any pension or a significantly reduced pension due to the RWT and interest, plus any UK tax. Recent amendments effective March 1 2021 affecting preservation and retirement annuity funds provide that an emigrant can only access these funds after three years of ceasing to be an SA tax resident. The proposal means the emigrant will now also be liable for the RWT plus interest over this three-year wait, which will further reduce the value of the retirement balance. We hope many aspects of the proposal which are unclear will be clarified in the draft tax bill circulated around mid-2021. The proposal may result in emigrants electing to withdraw their SA retirement funds in full where possible and to pay any SA tax due as the risks of leaving these funds to grow in SA until retirement are too uncertain. The fiscus will receive some tax immediately. However, the withdrawal is an overall loss for the economy as the pool of retirement funds in SA will reduce and the tax base on any growth of the funds had they not been withdrawn will be gone.
Congratulations to Sanlam Private Equity and Cavalier Group winners of the SAVCA Private Equity Deal of the Year award