BD Business Law & Tax (April 2024)

BUSINESS LAW & TAX

A REVIEW OF DEVELOPMENTS IN CORPORATE AND TAX LAW

Data collection ‘dark patterns’ risk regulatory consequences

Ridwaan Boda & Shaaista Tayob ENS

In today’ s digital landscape, safeguarding personal information has become vital, especially with heightened scrutiny from regulatory bodies such as the SA information regulator

Direct marketing has emerged as a focal point for the regulator’ s attention Consequently, organisations face mounting pressure to ensure their data privacy practices align with laws and regulations, particularly regarding obtaining consent for data collection, processing and marketing in an ethical and transparent manner

sent, but some organisations resort to web design techniques that can have the effect of directing data subjects into sharing personal information or providing consent These techniques, commonly known as dark patterns, encompass design elements strategically crafted to steer data subjects towards actions benefiting the website operator

Some commentators suggest that such techniques are

often contrary to the data subject’ s intentions or best interests and push the boundaries of what is both ethical and legal It is not the intent of this article to argue for or against the use of dark patterns but merely to bring attention to this practice which, depending on whether you are a website operator or data subject, could either be viewed as an opportunity or a concern

SAFEGUARDS

violated or not

The purpose of the act is to safeguard personal information in accordance with the constitutional right to privacy, balancing it against other rights and important interests such as access to information, the free flow of information and freedom of economic activity

• Direct marketing has become a focal point for the regulator’ s attention CONTINUED

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Various approaches exist for securing data subject con-

EXAMPLES OF DARK PATTERNS RANGE FROM BUTTON PLACEMENTS TO CONCEALED OPT-OUT OPTIONS

Examples of dark patterns range from button placements to concealed opt-out options, allegedly by exploiting cognitive biases and diminishing user autonomy

While not explicitly addressed in the Protection of Personal Information Act (Popia), the use of these techniques raises the question as to whether the act has been

The act further sets out conditions for the lawful processing of personal information, aligned with international standards, and provides individuals with rights and remedies to protect their data

Some commentators believe that the use of dark patterns not only goes against

the purpose of the act but also many other provisions in the act such as purpose and limitation, data subject participation, accountability and so forth It is foreseeable that the regulator may view such techniques unfavourably, potentially leading to enforcement actions against offending organisations

Moreover, as consumer awareness of data privacy rights increases, there is a growing risk of backlash against organisations employing such practices

To mitigate this risk and uphold legal and ethical standards, organisations can take proactive measures such as conducting privacy impact

assessments and promoting privacy by design

This may include organisations opting to prominently display notices, ensuring upfront user awareness of data collection practices and rights, using clear and understandable language, and offering transparent consent options with privacy-friendly defaults

That said, organisations can still achieve their commercial and data monetisation objectives through carefully structuring their offerings with the guidance of an expert commercially minded data privacy counsel

New antitrust hurdles for SA dealmakers

• Approval for mergers likely to become more tricky as Competition Commission widens its scope

Securing clearances for mergers which are notifiable in SA is likely to be even more challenging in 2024

The Competition Commission’ s increased focus on a wider range of public interest factors combined with more active interventions by the department of trade, industry & competition and other third parties, like customers and competitors, in merger investigations and the emergence of novel theories of anticompetitive harm is having a significant impact on the timing required for clearances, as well as the nature, scope and cost of the conditions which may be imposed

Last year, the commission published a draft guideline on how it intends to approach the public interest assessment in merger reviews It has been the subject of extensive public comments, including by respected international legal organisations such as the International Bar Association, which pointed out that the commission should align its approach to investigations with international best practice

This recognises that only merger-specific effects should trigger the imposition of conditions, and any remedies imposed on merging parties should be proportional to the negative effects that they are intended to address

However, it seems unlikely the commission will divert substantially from the approach it has adopted since early 2023 In general, the commission requires that all merging parties demonstrate their merger will promote a greater spread of ownership by workers and/or historically disadvantaged persons (HDPs)

Where they cannot show that the overall shareholding by HDPs or workers will increase after the merger, the commission will request that merging parties establish a trust to hold at least 5% of the shares for workers in the target firm’ s SA business (or sometimes even in the acquiring group)

In cases where, for example, the target group has no SA subsidiary or there are no, or very few, employees in SA (so establishing a trust for them to hold a shareholding would not meaningfully contribute to a greater spread of ownership), the commission may sometimes accept alternative commitments

DEALS IN MARKETS IN WHICH THERE IS PERSISTENT CONCENTRATION WILL FACE HEAVY SCRUTINY

These tend to focus on providing substantial amounts of financial support for HDPs in the supply chain, enterprise or skills development Alternatively, the commission may accept undertakings to import less and buy more goods or services locally

The scale of these financial commitments is frequently substantial, and conditions of this nature expose the merged firm to ongoing monitoring by the commission, for as long as the conditions remain in place

And, as a number of firms have recently discovered to their detriment, there is a significant risk that if economic circumstances turn significantly for the worse (as they did as a result of Covid-19 and the Ukraine conflict), they may be unable to fulfil their

promises on time or indeed at all

The increased focus on the public interest, including the potential effect of a proposed transaction on small or historically disadvantaged suppliers, customers and competitors, is also shifting the commission’ s approach to market analysis away from prioritising consumer welfare (cheaper prices, more choice) and towards intervention in markets which are competitive but have structural features that the commission regards as hampering participation by new entrants or smaller competitors

As articulated in the Concentration Tracker the commission published in 2021, it is concerned too many markets in SA are dominated by only two or three players, and it has identified a high degree of inequity in the distribution of firm income

As a result, it is prioritising the investigation of deals proposed in highly concentrated industries, especially where there are increasing levels of concentration But deals in markets in which there is persistent concentration will face heavy scrutiny even if the merger won t give rise to a significant accretion in market share

Proposed mergers in sectors that have already been identified by the commission as suffering from concentration, such as the agriculture value chain, healthcare, communications, steel and chemicals, financial markets, transport and the so-called sin industries, are likely to be challenging, and will require significant economic analysis, particularly if the parties are relying on alleged efficiencies

While the provisions of the Competition Act that provide for a separate review of acquisitions by foreign

JOINING FORCES

acquiring firms have yet to be signed into law by the president, considerations akin to those raised in other jurisdictions such as the EU, US and Canada which address concerns about foreign acquisition of critical local infrastructure or resources are already being actively ventilated in the SA merger review process

Merger conditions that address food security, preservation or expansion of local manufacturing capabilities or development of homegrown technology, or the preservation of a local head office, are increasingly common

Novel theories of competition law harm are also developing, which is increasing uncertainty for investors

For example, in October 2023 the tribunal prohibited the intermediate merger involving the sale of Sasol s sodium cyanide business to a Czech Republic-based producer of sodium cyanide, Draslovka Holding

The merging parties argued the transaction would benefit SA customers, since the buyer, a specialist cyanide producer with world-leading technology, had plans to expand the SA business

The commission, however, recommended a prohibition based on concerns about inevitable post-merger price increases which would be detrimental to SA customers presumably because a foreign owner would charge global marketrelated prices

The tribunal agreed, and prohibited the transaction

This case also illustrates that interventions in merger investigations by customers

and/or competitors, (sometimes even late into the investigation time period) can derail transaction timetables and may ultimately threaten the implementation of a transaction

Even when the target firm is in substantial financial difficulty, clearances may take 12 to 18 months to secure, though proactive negotiations with the commission, department of trade, industry & competition, trade unions and other stakeholders on proposed conditions can potentially reduce this time period

As suggested by the guidelines the commission published in late 2022, merger filing requirements may apply to more deals if the commission actively monitors transactions which fall below the monetary thresholds for compulsory notification, and requires more of

THE LIKELIHOOD AND SCOPE OF MERGER CONDITIONS SHOULD INFORM THE OVERALL STRATEGY ADOPTED

these small mergers to be notified This is a particular risk in the digital space, but the commission could potentially call for a filing of any transaction in which the consideration for the acquisition or investment exceeds the target firm SA asset/turnover threshold for large mergers (currently R190m); or the parties effectively value the target firm at more than this

An early assessment of

both competition and public interest issues is critical to assist parties to a proposed merger to anticipate any substantive issues, as well as to plot realistic timelines

The likelihood and scope of merger conditions should inform the overall strategy adopted to the deal negotiation process, as well as the preparation of the merger filing documents

For example, firms need to be careful about how they describe their merger in internal documents and articulate the rationale for, or anticipated effects of, a proposed merger

These documents may be subject to discovery if the commission or the department of trade, industry & competition contest a proposed sale, or third parties apply to the Competition Tribunal intervene in a large merger

In transactions in which challenges around public interest conditions are anticipated, generous long stop dates should be agreed to enable sufficient time for submissions to be made to the commission, especially if the department steps in to request commitments Sale agreements should cater for appeals to the tribunal and lay out who bears the risk of transaction collapse

While these considerations are most relevant in SA, other jurisdictions in Africa, including Kenya, are increasingly adopting a similar approach to merger investigations, particularly in the realm of public interest considerations

Comprehensive, practical and co-ordinated competition law advice is crucial

Data collection ‘dark patterns’ risk regulatory consequences

In conclusion, though they have been in use for a long time, dark patterns are

increasingly noticed, disliked by regulators and educated consumers, and potentially contrary to the spirit, intent and purpose of data privacy

legislation Data subjects are becoming more savvy and legislators more strict Organisations that look to implement dark patterns or

seek to obtain consent through nontraditional means do so at the risk of regulatory action

Notwithstanding this,

organisations may still take proactive steps which comply with laws in order to achieve their data monetisation aspirations

Heather Irvine Bowmans

CELEBRATING EXCELLENCE.

2024 EXECUTIVE PROMOTIONS Committed to growth and innovation

ADRIEN WONG

DANIELLE LAUBSCHER

JOSHUA BROLL

NILS BRAAT VEDT

ANNE-SOPHIE LENET TE

GUSTAV VAN DEN BERG

KARIN MALHERBE

REFILWE MPHEGO

CHRISTIEN QUINN

HENDRIK HUGO

LAKSHA JUDDOO PRAYAG

SHEILA PACUTO

BUSINESS LAW & TAX

SA leads progress in arbitration

•

AFSA rules will be

used as model for Brics dispute resolution

SA is quickly becoming a leading jurisdiction in the arbitration sector

A recent testament to the quality of SA’ s arbitration framework is the announcement that the Arbitration Foundation of SA (AFSA) rules will serve as the model for the long-awaited Brics Dispute Resolution Framework, confirmed at the eighth Brics Legal Forum held in Johannesburg in December 2023 Representatives from the

FIND A WAY FORWARD

Federal Council of the Brazilian Bar Association, the Association of Lawyers of Russia, the Bar Association of India, the China Law Society and the Law Society of SA resolved to incorporate the framework, which will be modelled on the AFSA modified rules, ready for adoption and ratification at the next Brics Legal Forum later this year International arbitration in SA is governed by the International Arbitration Act (2017), which incorporates the Unictral Model Law Domestic arbitrations in SA are governed by the Arbitration Act (1965) The AFSA and the Association of Arbitrators Southern Africa remain the primary domestic arbitration organisations used to resolve commercial disputes in SA

In a development that further enhanced SA’ s reputation as a seat of international arbitration, the AFSA joined the London Court of International Arbitration and the ICC International Court of Arbitration to become a full member of the International Federation of Commercial Arbitration Institutions (Ifcai)

LEGAL SCOOP

in 2023 With 52 members worldwide, Ifcai aims to build relationships among commercial arbitration centres through the exchange of information and sharing of best practices in arbitration

The recent AFSA-Southern African Development Community alliance, which aims to encourage member states to align their arbitration laws with international conventions and standards, celebrated a recent triumph with the adoption of the International Arbitration Bill, 2023 by the Malawian parliament

The bill is the culmination of proposals put forward by the collaboration between AFSA and the Malawi Law Society, and its adoption opens the way for Malawi to become a part of the esteemed AFSA alliance

AFSA also launched Young AFSA, a new arbitration association with a focus on promoting knowledge sharing, skills building and networking among legal professionals and students between the ages of 18 and 40

Free membership makes it accessible for young professionals interested in arbitration Young AFSA aims to organise skills-focused programmes, seminars and social events for knowledge exchange, as well as encourage and foster relationships between young professionals across southern Africa Young AFSA hosted its first event in November 2023

These significant developments attest to SA’ s reputation and commitment to advancing arbitration across Southern Africa

Franchise sector set to benefit from industry code

It is not news that for several years businesses in SA have faced a series of setbacks, with loadshedding, increased fuel prices and interest rates, a weaker rand and Covid-19 all taking their toll Consumer-facing businesses such as restaurants and retail outlets have been particularly hard hit, especially as most businesses in these sectors are smaller, independently owned outlets, often without significant resources to cushion against the economic pressures that have become the order of the day

The franchise sector has been no exception, although several characteristics of the sector make it less susceptible to economic turmoil Franchisees have the advantage of using an established model backed by a record of success, and benefit from the brand recognition and customer loyalty developed by the franchisor and the existing network

In addition, franchisees count on support from their franchisors to help them navigate difficult economic times, including training, marketing and operational support These advantages help franchisees reduce costs and improve profitability, even when independent entrepreneurs may struggle to manage poor business performance

In franchise relationships, therefore, collaboration and a mutually supportive engagement between franchisee and franchisor is

absolutely vital This is particularly important when, as they inevitably will, differences arise between them in regard to policies and practices that affect the operations and financial viability of their businesses

In recent months, several high profile cases have arisen, involving substantial and well-known franchisors such as Pick n Pay, Shell and Cash Crusaders, which have served to illustrate this point All of these matters have resulted in litigation As is always the case, this litigation is adversarial and destructive of relationships, which is of benefit to no-one concerned

The Consumer Protection Act (CPA) was the first and is still the only law in South Africa that expressly provides terms for the franchise relationship To counter where it was perceived most malpractice in the franchise industry occurs, the CPA provides for extensive upfront disclosure by franchisors before a franchisee commits themselves to invest in a franchise However, it does not contain express provisions regulating the ongoing relationships between franchisors and franchisees It also doesn’t promote the atmosphere of collaboration necessary for

franchisors and franchisees to resolve disputes between them respectfully and for mutual benefit

Against this background, the Franchise Association of South Africa (Fasa) some years ago tabled an Industry Code for adoption in terms of Section 82 of the CPA The draft code has been under discussion for some years between Fasa and the department of trade & industry The code consists of two main areas an alternative dispute resolution mechanism for disputes among franchisors and franchisees; and a code of conduct aimed at regulating conduct in the industry and providing for certain matters not dealt with by the CPA

The dispute resolution mechanism provides for the appointment of a Franchise Industry Ombud (FIO) The FIO will be a nonprofit company, the board of which will consist of representatives of Fasa, franchisors and franchisees All franchisors and franchisees will be subject to the FIO s jurisdiction The FIO will elect one of its board members to act as the ombudsman for the industry The ombudsman will have the power to hear representations from the parties to any dispute concerning or related to a franchise relationship, and make recommendations to resolve the dispute

The FIO process has certain distinct advantages over litigation through the courts The ombudsman is required to have experience in both dispute resolution

and the franchise industry As such, that person will bring a different approach to the resolution of disputes, particularly a specific understanding of the issues that may arise and the business and legal interests of the parties As opposed to the “all or nothing” , “winner and loser” outcomes of litigation, the ombudsman will be able to seek a resolution balancing the best interests of both parties

In terms of the draft Industry Code, every franchisor will have to include a notice in all its disclosure documents and franchise agreements that they are bound by the code, and informing the franchisee that they are entitled to refer any dispute to the FIO They are also required to provide any franchisee with a copy of the code on request

The code also sets out standards of conduct to be observed by franchisors and franchisees These include complying with franchise legislation; observing the constitutional values of dignity and equality; refraining from unfair discrimination; dealing in good faith with each other; responding to each other in a reasonable time; complying with the Code of the Advertising Regulatory Board in all marketing, promotions and advertising; and paying all levies arising in terms of the code to the FIO timeously

The code lays out specific responsibilities for franchisors, including providing franchisees with training, supervision and

assistance in the operation of the franchise business They will also be required to deposit all moneys paid by a franchisee in contemplation of the conclusion of a franchise agreement into a separate bank account, and to notify the franchisee in writing of any alleged breach of a franchise agreement

In the event of a breach, the franchisor must afford them reasonable time to remedy it, except where the franchisor is entitled to terminate the franchise agreement without notice

The code will specify that franchisors should only select and appoint franchisees if they appear to have sufficient skills and resources to carry on the franchise business

Franchisors are also required to be the owner or authorised licensee of all copyright, trademarks and intellectual property (IP) used in the franchise business

For their part, the code will require franchisees to only use the franchisor s IP as authorised, and not disclose any of the franchisor s IP to third parties, either during the term of the franchise agreement or after it The franchisor s IP will be protected by a provision that

THE CODE ALSO SETS OUT STANDARDS OF CONDUCT TO BE OBSERVED

BY

FRANCHISORS AND FRANCHISEES

forbids the franchisee from using their IP inappropriately, including their confidential information and trade secrets

They will also be required to comply with the franchisor s operations manual and business system, supplying the franchisor with verifiable operating data and allowing the franchisor access to the premises

Franchisees will need to devote their best endeavours to the maintenance and growth of the franchise business and not compete with the franchise system without the written consent of the franchisor

The code has been through a number of iterations It is hoped that, once accredited and gazetted, it will not only enhance the culture of cooperation and mutual dependency between franchisors and franchisees, but also promote the resolution of disputes in a mutually beneficial manner, allowing the parties to continue an effective working relationship

It is our hope that this important reform will support the growth and development of franchising in SA, even as economic pressures put this important sector under almost unprecedented pressure

● Ian Jacobsberg is a Director at Fluxmans Attorneys He is one of SA s leading experts in franchise law and a Director of the Franchise Association of SA He also acted as its chairman in 2014/2015

Kylie Slambert, Samantha Whitaker & George Bullock Baker McKenzie

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BUSINESS LAW & TAX

Landmark ruling bolsters parental leave

• Legislative amendments will foster more inclusive and supportive approach to childcare responsibilities

Five years ago, new fathers in SA were only granted three days of paid family responsibility leave In a significant move, President Cyril Ramaphosa signed a new law on November 18 2018 that changes the position significantly

This law provides new fathers with 10 consecutive days of unpaid leave following the birth of their child These claims are to be paid by UIF

Furthermore, the legislation extends similar benefits to adoptive parents with 10 consecutive weeks of paid leave and commissioning parents involved in surrogate agreements This all changed recently with a landmark ruling by a South African high court that allows both parents to share in four months of parental leave

FACTS OF THE CASE

In Van Wyk and Others v

Keeping

Two recent legislative developments in the world of artificial intelligence (AI) show how difficult it is for regulators and the rest of us to rationally keep up with AI

While the UK Automated Vehicles Bill is making its way through their parliament, in mid-March 2024 the European Union approved its Artificial Intelligence Act The problem that we all face is the enormity of the laws put in place The AV Bill has 100 sections and six schedules which, if printed out, will span about 90 pages, with regulations still to come The AI Act is a gigantic 459 pages including 160 pages of recital I am not suggesting that we will have an Automated Vehicles Act in SA any time soon One of our problems is that already identified in the

Minister of Employment and Labour (2022-017842) [2023] ZAGPJHC 1213; [2024] 1 BLLR 93 (GJ); (2024) 45 ILJ 194 (GJ); 2024 (1) SA 545 (GJ) (October 25 2023), Werner and Ika van Wyk along with the advocacy group Sonke Gender Justice initiated a case against the employment & labour minister The Van Wyk couple brought forward the case because Werner was not permitted by his employer to take enough leave to care for their baby This forced Ika, who runs her own company, to take leave, causing her business to suffer They argued that the 10 days of parental leave offered to fathers is inadequate, irrational and discriminatory

The court declared certain provisions of the Basic Conditions of Employment Act (BCEA) and corresponding provisions in the Unemployment Insurance Fund Act (UIF Act) to be invalid The specific sections are 25, 25A, 25B, and 25C of the BCEA and sections 24, 26A, 27 and 29A in the UIF Act These provisions unfairly discriminated

and entrenched stereotypes between mothers and fathers, same-sex partners, as well as between different sets of parents based on how their children were born (ie child bearer via natural birth, surrogacy, adoption)

The declaration of constitutional invalidity was suspended for two years, such that remedial legislation could be enacted by parliament During this suspension period, employers are required to adapt their policies in line with the interim provisions ordered by the court This ruling represents a crucial step forward in aligning SA’ s labour laws with principles of equality and shared parenting

Pending legislative changes, the provisions are to be read as follows:

In section 25(1), if you ’ re a single parent, you ’ re entitled to at least four consecutive months of parental leave If you and your partner are both parents, you collectively get the same entitlement For couples, you can decide how to take the leave:

HAPPY FAMILIES

One of you can take the entire period; or

You can divide the leave between the parties

Both parties must inform their employers in writing at least 30 days before the birth of their child about their decision and options they are going to exercise If they opt to share the leave, the specific appropriation thereof must

IN SECTION 25(1),

IF YOU’RE A SINGLE PARENT, YOU’RE ENTITLED TO AT LEAST FOUR CONSECUTIVE MONTHS OF PARENTAL LEAVE

CONSUMER BILLS

be specified

However, it must be remembered that the childbearing parent may not work four weeks before or six weeks after the date of birth of the child Hence, in such instances, the remaining six weeks would be available to the other parent or partner

In section 25(2), “employee ” is replaced with “pregnant mother” Throughout section 25, wherever “maternity” appears, it should be read as “parental”

Section 25A (1) now states that as a parent, you ’ re entitled to the leave described in section 25(1) Section 25A(2)(a) is clarified by adding after “born” : “subject to the provisions of section 25(2)”

Section 25B(1)(b) is

replaced with “the leave described in section 25(1)” (10) Section 25B(6) now states that if an adoption order is made for two adoptive parents, they are both entitled to leave as described in section 25(1)

In Section 25C (1), the provisions are replaced with the words that as a commissioning parent in a surrogate motherhood agreement, you ’ re entitled to leave as described in section 25(1)

Section 25C (6) now states that if there are two commissioning parents, they are both entitled to leave as described in section 25(1)

The provisions of sections 25(7), 25A (5), 25B(5) and 25C (5), along with corresponding provisions in the UIF Act, should be interpreted consistently with the changes made by this order Consequently, each parent who is a contributor as defined in the UIF Act is entitled to the benefits prescribed therein

As an interim relief measure, all parents are entitled to a collective period of at least four months of parental leave during the two-year suspension period

Recent legal developments have brought significant changes to parental leave rights in SA Thanks to a landmark court ruling and subsequent legislative amendments, both mothers and fathers now have more equitable access to parental leave

While awaiting parliament action to address legal gaps, couples are empowered to decide how to allocate parental leave, fostering a more inclusive and supportive approach to childcare responsibilities This shift marks a pivotal moment in promoting gender equality and parental involvement in caregiving duties

up with AI regulation is a complex task

PAT R I C K B R AC H E R

UK, namely potholes The figures from the UK are mouthwatering From 2022 to 2023, 1 4-million potholes were filled and the government has set aside £5bn until 2025 to tackle the problem Autonomous vehicles are vehicles that can drive themselves safely and can follow all road traffic rules without the need for a human to monitor or control the vehicle The UK Bill creates new licensed and regulated entities who will assume liability for the way that an automated vehicle

drives If a vehicle satisfies the self-driving test and other requirements, a licence is issued to the no-user-incharge operator The operator, not any person in the vehicle who has no control over how the vehicle drives, will be responsible for the behaviour of the vehicle This makes sense where the vehicles have no steering wheel and no visible controls

One exception to the rule is where the vehicle is being used on a road and it would have been obvious to a competent and careful user that the current state of the vehicle makes it dangerous to use That would require knowledge of some defect or poor operating characteristics of the vehicle when it sets off on its journey

On the other hand, if a

person is a user-in-charge and is in control or in a position to exercise control of the vehicle and the vehicle performs an act that would constitute an offence, the user-in-charge is liable as if the driver unless control of the vehicle was handed back to the person by the automated system at a time when there was nothing the person could do about it

As regards civil liability, this has been covered in the UK since 2018 If the vehicle is insured, the insurer is liable If the vehicle is not insured the owner is liable for an accident caused by an automated vehicle

Although there will be a considerable period before this technology is seen on our roads, the point I am illustrating is the complexity and massive compliance obligations being introduced

into a world that is already overregulated Huge fines are envisaged in the EU AI Act for AI applications that threaten citizens rights, such as facial recognition, emotional recognition at work and schools, social scoring, predictive policing and AI that manipulates human behaviour or exploits vulnerabilities The systems developed must ensure human oversight and responsibility That does not answer the question of what

HUGE FINES ARE ENVISAGED IN THE EU AI ACT FOR AI APPLICATIONS THAT THREATEN

CITIZENS’ RIGHTS, SUCH AS FACIAL RECOGNITION

will happen when AI learns to act without allowing human oversight

How close AI is coming to natural intelligence can be seen from the EU definition of an AI system as a machine-based system designated to operate with varying levels of autonomy that may exhibit adaptiveness after deployment and that, for explicit or implicit objectives, infers, from the input it receives, how to generate outputs such as predictions, content, recommendations or decisions that can influence physical or virtual environments

If you delete machinebased , that describes all of us

Jonathan Goldberg & Grant Wilkinson Global Business Solutions

Take care in absence of AI regulation

• Artificial intelligence poses numerous risks, and boards in SA remain accountable for IT governance

Ridwaan Boda, Era Gunning & Lindo Ntuli ENS

The European parliament recently approved the Artificial Intelligence Act, the first of its kind in the world

As SA companies continue to adopt artificial intelligence (AI) at a rapid pace, the natural question arises: if, and when, will SA adopt AI legislation? The country currently has no explicit legal framework for AI

AI can pose different types of risks, depending on the technology deployed The lack of AI regulation could introduce risks such as:

● Use cases and risk categorisation: in the EU, four risk-based categories have been created: unacceptable risk (which has been banned), high risk (which is subject to strict regulatory requirements), limited risk and minimal risk

● Use cases and risk man-

agement: not all AI can be regarded in the same way when it comes to AI risk management By way of example, companies that are considering the use of a popular generative AI tool such as ChatGPT are different from companies looking to implement AI as part of their core operations (whether internal

THERE ARE SOME POSITIVE INDICATIONS THAT SA AIMS TO BE A COMPETITIVE

PLAYER IN THE GLOBAL AI SPACE

or client-facing) or to develop bespoke AI systems

● Data privacy: AI introduces a new set of privacy issues

Privacy issues regarding data breaches are a common challenge and predate the emergence of AI However, the advancement and robust-

ness of AI models have the capacity to unmask anonymised data through inferences (ie deducing identities from behavioural patterns) AI may therefore be able to leak sensitive data directly or by inference

● Cybersecurity: while traditional cyber threats from human and software failures do exist, AI presents an increased scope for cyber threats These threats emerge from the manipulation of data using AI and the exploitation of the inherent limitations within AI algorithms

● Explainability and complexity of AI: explainability of AI systems outcome is a challenge, especially in the financial sector As a direct result of being complicated and multifaceted, AI models are often referred to as “black boxes” This hinders the ability to detect the appropriateness of AI decisions, thereby exposing organisations to vulnerabilities such as biased data, incorrect decisionmaking and unsuitable mod-

REAL-WORLD PROBLEMS

elling techniques

● Embedded bias: embedded bias is defined as computer systems that systematically and unfairly discriminate against certain people in favour of others Customer classification processes used in AI can result in bias, including in the financial sector

● Intellectual property (IP): globally, lawmakers and courts continue to grapple with issues around AI inventions and IP ownership, and organisations themselves often struggle to deal with ownership of AI development and AI output

● Hallucinations: generative AI has been known to create “hallucinations” , such as generating fake case law or fake information

● Prompt hacking: this may result in illegal behaviour being perpetrated using company resources For example, an AI tool can be tricked into providing advice such as how to dispose of a dead body or

how to bypass certain security protocols

Regulating AI is therefore crucial in ensuring that AI achieves outcomes that are in the interests of society While AI remains largely unregulated in SA, existing legislation like the Protection of Personal Information Act, 2013 does regulate some activities conducted by organisations using AI, by preventing the unlawful processing of personal information

AMBITION

Despite the current lack of regulation, there are some positive indications that SA aims to be a competitive player in the global AI space

In November 2022, the department of communications & digital iechnologies launched the Artificial Intelligence Institute of SA and AI hubs (University of Johannesburg and Tshwane University of Technology)

SA’ s ambition to be a player in the global AI space

necessitates a regulatory regime that can regulate the robustness of AI and the possible threats that it may impose on individuals and organisations

Until such time as regulation comes into force, companies can and should selfregulate by adopting responsible AI measures

These include a combination of training, policies and procedures, ethics and governance structures, AI ethics assessments and proper contracting for AI services and products

It is important to note that boards in SA remain accountable for IT governance

By allowing AI to be used and implemented in an organisation without any governance mechanisms, will in the absence of regulation not only create legal risk but also reputational, commercial and financial risk and, in some cases, embarrassment

Corporate responsibility in the AI era

Pooja Dela-Cron & Paula-Ann Novotny Webber Wentzel

For corporations in SA, Africa, and globally, artificial intelligence (AI) introduces new risk areas that must be navigated with caution and responsibility

General counsel the world over are required to investigate and implement strategies around issues of privacy, data protection and nondiscrimination This is paramount because the misuse of AI can lead to significant reputational damage and legal liabilities

Corporations must adopt ethical AI frameworks and corporate social responsibility initiatives that prioritise human rights, demonstrating a commitment to responsible business practices in the digital age

Corporations stand at the frontline of the AI revolution, bearing the responsibility to

wield this powerful tool ethically Google’ s Project Maven, a collaboration with the Pentagon to enhance drone targeting through AI, faced internal and public backlash, leading to the establishment of AI ethics principles by the company

This example demonstrates the importance of corporate accountability and the potential repercussions of neglecting ethical considerations in AI deployment It also highlights that influential corporations hold a significant level of leverage in their environments This leverage should be used to progress respect for human rights across the value chain

Regulating AI presents a formidable challenge, particularly in Africa, where socioeconomic and resource constraints are significant The rapid pace of AI development often outstrips the ability of regulatory frameworks to adapt, leaving gaps

that can be exploited to the detriment of society

Moreover, regulatory developments in the Global North often set precedents that may not be suitable for the African context, highlighting the need for regulations that are inclusive, contextually relevant and capable of protecting citizens rights while fostering innovation

The fast-paced evolution of AI technology poses a significant challenge to regulators, especially in the African context, where resources and expertise in technology governance are often limited

SUSTAINABLE FUTURE

The EU s General Data Protection Regulation (GDPR) serves as a pioneering model for embedding principles of privacy and data protection in technology use, offering valuable lessons for African nations in crafting their regulatory responses to AI The path towards a sus-

tainable future, where AI benefits humanity while safeguarding human rights, requires collaboration among businesses, regulators and civil society Stakeholders must work together to develop and implement guidelines and standards that ensure AI technologies are used ethically and responsibly

Highlighting examples of responsible AI use, such as initiatives that provide equitable access to technology or projects that leverage AI for social good, can inspire others to follow suit Collaboration is key to harnessing AI s potential

THE INTERSECTION OF AI, BUSINESS AND HUMAN RIGHTS PRESENTS COMPLEX CHALLENGES BUT ALSO OPPORTUNITIES

while safeguarding human rights and ethical standards

Initiatives such as the Partnership on AI, which brings together tech giants, nonprofits and academics to study and formulate best practices on AI technologies, exemplify how collective action can lead to responsible AI development and use

As AI and related technologies continue to transform our world, we must not lose sight of the human values that define us The intersection of AI, business and human rights presents complex challenges but also opportunities for positive change, not only for governments but for corporations too By fostering ongoing dialogue and co-operation among all stakeholders, we can shape a future where technology serves humanity s best interests, ensuring that the digital age is marked by innovation, equity and respect for human rights

Corporate governance frameworks will need to adapt in response to these advances

As Africa navigates the complexities of AI integration, the journey must be undertaken byte by byte, with a steadfast commitment to ethical principles and human rights The diverse tapestry of cultures and histories offers unique insights into responsible AI governance

POSITIVE CHANGE

By prioritising transparency, accountability and inclusivity, African governments and corporations can lead the way in demonstrating how technology, guided by human values, can be a powerful tool for positive change

In the digital age, the fusion of innovation and ethics will define Africa s trajectory, ensuring AI becomes a catalyst for empowerment rather than a source of division

BUSINESS LAW & TAX

Make way for the global minimum tax

• Budget gets the ball rolling to tackle base erosion and profit shifting and limit a ‘ race to the bottom’

Ruben

As anticipated, the 2024 budget proposed the introduction of global minimum tax (GMT) legislation in SA

The announcement coincided with the release of a Draft Global Minimum Tax Bill, Explanatory Memorandum and a Draft Global Minimum Tax Administration Bill

What was perhaps not anticipated is the manner in which the draft legislation was introduced, as well its proposed retrospective application An effective date of January 1 2024 has been proposed

The National Treasury estimates that the introduction of GMT legislation will result in additional tax revenues of R8bn in 2026/27 putting to bed any thoughts that its introduction will result only in additional compliance obligations

The introduction of GMT in SA is in line with global trends and is in accordance with initiatives by the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting, which was endorsed by more than 135 countries and comprises two pillars The rules under these two pillars are designed to limit the mechanisms that multinational enterprises (MNEs) use to shift profits from high-tax to low-tax jurisdictions

Work under Pillar One

focuses mainly on the digital economy, whereas Pillar Two focuses on other base erosion and profit shifting matters, including the introduction of GMT The minimum tax aims to limit the “ race to the bottom” where jurisdictions compete to attract income by offering low tax rates and tax incentives MNEs with annual consolidated revenue in excess of €750m in at least two of the four fiscal years immediately preceding the tested fiscal year will be required to pay a minimum tax of 15% in each jurisdiction in which

IF THE MINIMUM 15% TAX HAS NOT BEEN PAID IN A PARTICULAR JURISDICTION, ADDITIONAL TOP-UP TAXES ARE PAYABLE

they operate If the minimum 15% tax has not been paid in a particular jurisdiction, additional top-up taxes are payable, though not necessarily in that jurisdiction

In December 2021, the OECD published GloBE Model Rules, which form the basis of GMT The rules were followed by the release of detailed commentary: Tax Challenges Arising from the Digitalisation of the Economy Commentary to the Global Anti-Base Erosion Model Rules (Pillar Two) in March 2022 and a series of Admin-

istrative Guidance

To ensure consistent and co-ordinated outcomes, implementing jurisdictions are required to apply the rules in accordance with ongoing updates provided by the Inclusive Framework through Commentary and Administrative Guidance, with very limited modification To meet these commitments, it is proposed that the model rules be incorporated into our domestic legislation by reference to the Model Rules, Commentary and Administrative Guidance

It is further proposed that the rules be applied and interpreted in accordance with the most recent Commentary and Administrative Guidance, although the proposed wording in the draft legislation is unclear

UNCERTAINTY

While the need to ensure consistency and globally coordinated outcomes is understandable, this approach may lead to greater uncertainty, particularly during the transitional phase

In SA, it is proposed that additional top-up taxes be imposed in terms of:

(i) an income inclusion rule, which taxes the SA entity on its share of top-up taxes arising in respect of the lowtaxed income of any foreign constituent entity in which it has a direct or indirect ownership interest; and

(ii) Domestic minimum top-up tax (DMTT), which imposes a joint and several tax liability on the SA domes-

NO PLACE TO HIDE

tic constituent entities of an MNE for any top-up tax arising in respect of lowtaxed income of those domestic “constituent entities” , calculated on an aggregated domestic basis

The introduction of a DMTT ensures SA protects its tax base and does not give away taxing rights to other jurisdictions A noticeable difference between the model rules and the draft domestic legislation is that the former apportions liability in proportion to “GloBE income” , whereas the latter proposes joint and several tax liability

A policy decision appears to have been made that the DMTT should not be “qualified” (ie QDMTT) There are a number of requirements for a DMTT to be considered “qualified” , including that the jurisdiction is prohibited from refunding all or some of the taxes to the affected MNEs by providing related benefits

It is unclear why a QDMTT is not being implemented but a further implication of not doing so is that MNEs will not be able to rely on the permanent QDMTT

safe harbour that was introduced in terms of the July 2023 Administrative Guidance In terms of the QDMTT safe harbour, businesses may elect to prepare a single QDMTT computation for a jurisdiction and no additional top-up tax will arise under the income inclusion rule or the Undertaxed Profits Rule, once introduced

A DMTT ENSURES SA PROTECTS ITS TAX BASE AND DOES NOT GIVE AWAY TAXING RIGHTS TO OTHER JURISDICTIONS

The Draft Global Minimum Tax Administration Bill also references the model rules as well as the Tax Administration Act, 2011 and provides for, among other things, the obligation and due dates to submit a GloBE information return, the due date for payments, interest, penalties and elections

A designated local entity may submit the GloBE information return to the SA Revenue Service (Sars) on behalf of all domestic constituent entities

The GloBE information return must be submitted within 15 months of the end of the fiscal year, or within 18 months if it is the first year, commencing on or after January 1 2024 but before January 1 2025 Payment of any top-up tax due must be made on or before the due date for submitting the GloBE information return

HEADACHES

The period for which records must be retained for purposes of GMT legislation is extended from five years (in terms of the Tax Administration Act, 2011) to six years This requirement is likely to result in administrative headaches for taxpayers trying to assess which records are (exclusively) for purposes of GMT legislation

Similarly, the prescription period in terms of which Sars may issue assessments for GMT is extended to six years

Is it still necessary to report death of an expat?

Globalisation, coupled with opportunities abroad, has made it quite common for many South Africans to emigrate But although an expat may think they are finally free from SA bureaucracy once they leave, this is often not the case

Aside from the more wellknown issue of formal emi-

gration and the implications of accessing pension fund contributions after emigrating, there is also the issue of their family reporting the expat s death with the SA department of home affairs on their passing

ESTATE

Apart from the fact that it enables the government to maintain accurate registers and records, it has a more personal impact on the

expat s estate To wind up an expat s SA estate, the master, the banks and the financial institutions all require an SA death certificate

This is part of their internal processes and to confirm that the deceased is in fact deceased and that it is not an elaborate fraud

Without the SA death certificate, the master will not issue letters of authority/ executorship, the banks will not pay out the account

balances and the financial institutions will not pay out investments

It is not to say that these assets will be forfeited but rather that everything will be frozen until such a time as the death has been reported to home affairs

IN LIMBO

Notwithstanding the inconvenience of the SA estate being stuck in limbo, it may also feel like bureaucracy is

conspiring to hinder the process In fact, if reported and done correctly at the start of the process, the estate should run smoothly and uneventfully

The other issue related to reporting the death to home affairs is that often the family no longer resides in SA and they cannot afford to return for the sole purpose of reporting the death

A simpler, more costeffective way around this is

for the death to be reported at the appropriate SA embassy, which will then liaise with home affairs to obtain the death certificate

As has been discussed, once an expat dies, it is imperative that the death is reported to home affairs Doing so becomes critical when trying to finalise the deceased s SA estate and it can even be reported from the family s new country of residence

Jenny Fung & Daniel Hirschowitz Fluxmans

Johannes Deloitte

BUSINESS LAW & TAX

VIEWPOINT AFRICA

Year of change for competition law in Kenya

Last year was a transformative year for competition law in Kenya, marked by a series of developments across various industries

In January 2023, the Competition Authority of Kenya (CAK) appointed Dr Adano Wario to serve in the capacity of acting directorgeneral, following the end of Wang’ombe Kariuki’ s second and final term

In January 2023, the CAK entered into a settlement agreement with Unilever Kenya after investigations into the company ’ s alleged abuse of buyer power in connection with a unilateral review of supplier payment terms by Unilever

Among other actions imposed, the terms of the settlement agreement require Unilever to gradually reduce payment terms for small and medium enterprises (SMEs), increase its procurement from SMEs, conduct supplier development training for its SME suppliers and implement a competition compliance training programme

The settlement agreement is an indication of the regulator’ s appetite for enforcing the relatively new buyer power regime and the commitment to fostering fair competition among SMEs

Guidelines for Consumer Protection (2017) and the Competition Administrative Penalties and Settlement Guidelines (2020)

On May 16 2023, the CAK announced that it had entered into a memorandum of understanding (MoU) with the EACCA aimed at fostering regional integration and cross-border trade and investment in the East African region

December 8 2020 to impose a financial penalty of KES 7,239,876 (about $47,000) on The Makini School after it acquired certain assets of RK Bhayani Nursery & Primary School, a school campus in Kisumu, Kenya, without the approval of the merger transaction by the CAK

manufacturers a total of KES

In April 2023, the CAK published draft Consolidated Administrative Remedies and Settlement Guidelines for stakeholder comment and input The proposed guidelines outline the CAK’ s approach to administrative remedies and settlement for specific violations under the Competition Act, particularly in relation to restrictive trade practices, control of mergers, abuse of buyer power and consumer welfare

The proposed guidelines are essentially an overhaul of the Fining and Settlement Guidelines (2018), the Administrative Remedies

On March 10 2023, the CAK announced its e-filing portal had been integrated with the e-citizen platform (an online portal which offers access to government services) in line with the government’ s agenda of enhancing the use of digital platforms in service delivery The integration is aimed at ensuring efficiency in filing applications relating to proposed mergers, exemptions and complaints relating to competition law infringements

The MoU is intended to establish a degree of transparency and predictability in relation to multijurisdictional merger notifications and facilitating information sharing on joint investigations, and market inquiries, among other matters The two agencies had hoped to develop merger notification guidelines by the end of December 2024 This has not yet occurred

It remains unclear how the EACCA intends to interact with other regional competition regulators such as the Comesa Competition Commission for instance In a judgment dated August 10 2023, the Kenya Competition Tribunal issued its first appeal decision relating to the imposition of penalties by the CAK for failure to notify a merger implemented in the early months of 2019 The Competition Tribunal agreed with the CAK decision of

The Kenya merger regime is suspensory and merging parties are prohibited from implementing a notifiable transaction until the CAK grants its approval In this case, the penalty imposed by the CAK was the equivalent of 1% of the deemed relevant turnover of Makini School for the 2018 financial year The tribunal also agreed that this penalty was justified and within the confines of the Competition Act

It should be noted that the merger was undertaken before the Competition (General) Rules, 2019 came into force on November 25 2019 The rules set out applicable merger thresholds which exempt certain mergers from notification to the CAK based on the value of turnover or assets of the merging parties

The decision is the first of its kind in Kenya and reaffirms the position of the CAK to actively enforce merger control rules in Kenya

On August 23 2023, the CAK announced that it had penalised nine steel

338,849,427 89 (about $2 2m) After investigations, the CAK had found that the steel manufacturers had engaged in cartel conduct resulting in an increase in the cost of construction of homes and infrastructure by artificially inflating the prices of steel products Further, the steel manufacturers, with the exception of one, were found to be participating in output restriction by agreeing to limit imports of certain steel components and creating an artificial shortage of steel products that raised prices

The Competition Act prohibits price fixing and output restriction and, as such, the companies were found to be guilty of anticompetitive practices and harming consumers

According to the directorgeneral of the CAK, the financial penalty was proportionate to the offence Currently, the companies have appealed to the Competition Tribunal for a review of the CAK decision

This was another resounding indication of the

THE AUTHORITY HAD FOUND THAT THE STEEL MANUFACTURERS HAD ENGAGED IN CARTEL CONDUCT

CAK’ s active enforcement of competition laws

On September 29 2023, the CAK announced its intention to conduct a market inquiry into the animal feed markets in Kenya and invited stakeholders for comments

The objective of the market inquiry was to assess the market interactions, market structures, market outcomes and other factors that may be affecting competition in markets along the animal feed value chains and recommend interventions that would support sustainable growth and competitive markets for a robust animal feed sector in Kenya The CAK has yet to publish its market inquiry report

On December 19 2023, after investigations into the operations of Majid Al Futtaim Hypermarkets Ltd (trading in Kenya as Carrefour), the CAK announced it had imposed a financial penalty of KES 1,108,327,873 60 (about $7,150,502 41) on the company for abusing its superior bargaining position in relation to two of its suppliers The CAK also ordered Carrefour to refund the suppliers

● Amar Grewal-Thethy is a partner, Meshack Mboya an associate & Makena Gachau a junior associate at ENS

AI technologies must uphold human rights

Pooja Dela-Cron & Paula-Ann Novotny Webber Wentzel

Artificial intelligence (AI) offers unprecedented opportunities for growth and innovation but also presents significant challenges and risks, especially concerning human rights and corporate governance

Imagine a future where your access to justice depends on an algorithm, your freedom of expression is filtered through AI and your personal data becomes a commodity traded without your consent This is not a dystopian fantasy but a reality we are inching closer to as AI becomes deeply integrated into our daily lives In an era where technology intertwines with daily life, AI emerges as a doubleedged sword, cutting through the fabric of society with both promise and peril As AI reshapes industries, it also casts a long shadow over

basic human rights and ethical business practices Consider the tale of a facial recognition system inaccurately flagging an innocent individual as a criminal suspect and, worse still, flagging individuals based on racial biases Such instances underscore the urgent need for vigilance and responsibility in the age of AI AI technologies are reshaping the legal landscape, introducing novel forms of digital evidence and altering traditional concepts of the rule of law Courts worldwide grapple with the admissibility of AI-generated evidence, while law enforcement agencies increasingly rely on facial recognition and predictive policing tools, raising profound concerns about fairness, transparency and accountability The erosion of legal protections and standards in the face of AI s opaque algorithms threatens the very foundation of justice, emphasising the need for regulatory frameworks that keep pace with technological advances

The transformative power of AI in the legal domain is both fascinating and alarming With the increasing spread of fake news, elections can be marred by misinformation, disinformation and hate speech AI advances can be key in orchestrating verification campaigns, as a pilot project conducted by the UN Development Programme in Zambia s 2021 elections showed In the US, the use of AI in predictive policing and sentencing algorithms has sparked debate over fairness and bias Studies such as the 2016 ProPublica report have highlighted how algorithms can inherit and amplify racial biases These issues underscore the necessity for legal systems to adapt and ensure AI technologies uphold the highest standards of equity, accuracy and transparency

IMPACT

IS FAR-REACHING

The impact of AI on human rights is far-reaching, affecting everything from freedom of expression to the right to

privacy For instance, social media algorithms can amplify or suppress certain viewpoints, while automated decision-making systems can deny individuals access to essential services based on biased data

Automated content moderation systems on social media platforms can also inadvertently silence marginalised voices, impacting freedom of speech The deployment of mass surveillance technologies in countries such as China similarly raises privacy concerns, illustrating the global need for AI governance that respects and protects individual rights

These examples highlight the critical need for AI systems that are designed and deployed with a deep understanding of their human rights implications Ensuring that AI technologies respect and promote human rights requires a concerted effort from developers, policymakers and civil society

Closer to home, the issue of digital and socioeconomic divides further complicates

the intersectionality of AI and human rights AI-driven solutions in healthcare and agriculture, for example, have shown immense potential to bridge socioeconomic gaps

The balance between leveraging AI for societal benefits while protecting individual rights is a delicate one, necessitating nuanced governance frameworks

While these frameworks are still nascent in many jurisdictions in the world, the UN has prioritised efforts to secure the promotion, protection and enjoyment of human rights on the internet

In 2021, the UN Human Rights Council adopted the UN resolution on the promotion, protection and enjoyment of human rights on the internet, which was heralded as a milestone and recognises that all of the rights people have offline must also be protected online

This resolution followed other UN resolutions, specifically condemning any measure to prevent or disrupt access to the internet and recognising the importance

of access to information and privacy online for the realisation of the right to freedom of expression and to hold opinions without interference

In 2023 the UN High Commissioner for Human Rights, Volker Türk, said the digital world was still in its early days

Around the world, more children and young people than ever before are online, either at home or at school, but, depending on birthplace, not everyone has this chance The digital divide means a staggering 2 2-billion children and young people under 25 around the globe still do not have access to the internet at home They are being left behind, unable to access education and training, or news and information that could help protect their health, safety and rights There is also a gap between girls and boys in terms of access to the internet Türk concluded by saying it may be time to reinforce universal access to the Internet as a human right, and not just a privilege

BUSINESS LAW & TAX

TECHNOLOGY, MEDIA AND TELECOMMUNICATIONS (TMT) LAW

New owners can bring risk

• Change-of-control clauses are crucial when there is a shift in ownership or management of a company

Isaivan Naidoo & Alexander Powell ENS

Achange of control is where there is a shift in a company ’ s ownership or management, resulting in the decision-making capacity of the entity being transferred to a different group of shareholders and/or directors

Change-of-control clauses are contractual provisions which are normally included in agreements such as mergers & acquisitions, financing arrangements or IT vendor contracts These outline the various circumstances under which the control of a company or its assets can be transferred to a third party A change-of-control clause aims to protect the interests of parties involved in the agreement by specifying the events or triggers, such as a change of ownership or management structure of one of the contracting parties, which would qualify as a change of control

Such clauses often set out the rights, obligations and remedies of the parties in the event of a change of control, potentially including (i) the ability to terminate the agreement; (ii) the right to accelerate payment obligations; or (iii) the right to impose restrictions on the transferee party

Essentially, a change-ofcontrol clause aims to safeguard the contracting parties’ interests and to ensure transparency and accountability in the contractual relationship

Common transactions

which trigger a change of control, include, inter alia:

● Disposition of all or the majority of company assets;

● Mergers;

● Acquisition of a company ’ s issued and outstanding shares in the target company;

● Change of the company ’ s board members; and

● Change of shareholders

LEGAL CONSIDERATIONS

Legal considerations regarding change-of-control clauses in IT contracts are paramount due to the potential implications on both contracting parties

First, drafting these clauses requires precision to define what constitutes a

ESSENTIALLY, A CHANGE-OFCONTROL CLAUSE AIMS TO SAFEGUARD THE CONTRACTING PARTIES’ INTERESTS

change-of-control event This definition must encompass various scenarios such as mergers, acquisitions or transfers of a substantial portion of assets, ensuring clarity to avoid ambiguity or disputes in the future

Moreover, parties must consider the implications of such changes on the obligations and rights under the contract For instance, the non-assigning party might want the right to terminate the contract or renegotiate terms if there’ s a change of control, safeguarding against

potential risks arising from dealing with a new entity with different capabilities, resources or priorities

Second, enforcement mechanisms and remedies need careful consideration within change-of-control clauses Parties should outline specific steps or notifications required in the event of a change of control and establish clear procedures for the affected party to exercise its rights Also, these clauses often include provisions about the consent of the nonassigning party for any transfer of rights or obligations resulting from a change of control, ensuring the original parties maintain control over whom they contract with Moreover, in the case of termination rights triggered by a change of control, parties must clearly delineate the consequences, such as the payment of termination fees or the transition of services to another provider

Contracting parties should consider the effect which a change of control may have on their continued business relationship After a service provider has experienced a change of control, customers should consider their best course of action by taking into account some of the following factors:

● Potential changes to the levels of support and service provider compliance with service levels;

● Impact on licencing models, such as on-premise versus software-as-a-service;

● Pricing and licencing costs; and

● Support and maintenance and/or continuation of specif-

IN CHARGE

ic products/service offerings

The bottom line is that when there is a change of control, the management and organisational structure is likely to be restructured and certain products and/or service offerings may altered or discontinued based on the direction and commercial goals of the new board/management of the vendor Companies must consider the degree of criticality of the vendors’/service providers’ service and how any changes to the services being rendered may affect them

The observed trend among service providers, particularly when there is a change of control, has led to a notable increase in customers terminating their agreements with vendors who recently have undergone such a transition and seeking alternative vendors However, the possibility of termination is dependent on (i) whether a right to terminate in light of a change of control is contained under your IT agreement; and (ii) the degree of criticality and integration of the vendor s software in existing business operations and enterprise systems As such, it is vital for

companies to consider vendor/service provider lock-in, migration costs and the degree of change required in migrating vendors

Furthermore, where a service provider experiences a change of control, they cannot materially degrade the standard of services being rendered under the applicable IT services agreement

Notwithstanding, a changeof-control provision in IT agreements, customers should ensure such agreements make provision for the right to terminate in the event that the new acquirer renders services which are materially or substantially deficient in any of the following areas: (i) pricing and licencing; (ii) software functionality and requirements; and (iii) support and maintenance

Therefore, to prevent a

ENFORCEMENT MECHANISMS AND REMEDIES NEED CAREFUL CONSIDERATION WITHIN CHANGEOF-CONTROL CLAUSES

company from degradation of the standard of IT services being rendered by a vendor/service provider due to a change of control, it should ensure that its IT agreement grants it the right to promptly terminate the agreement, and migrate to a new vendor, renegotiate core service terms that will be no less favourable than the previous agreement prior to the change of control event To avoid the risks of vendor lock-in and high migration costs, companies should engage in proper vendor due diligence before committing to a specific IT vendor It is important to consider factors, including but not limited to:

● Sandard terms and whether such terms may be amended;

● Vendor’ s attitude towards negotiations;

● Vendor’ s market dominance;

● Vendor’ s longevity and product/service offering roadmaps;

● Criticality of vendor’ s services;

● Degree of reliance on the vendor; and

● Ease of switching/migrating to a new vendor Therefore, it is recommended that any IT agreements an organisation may conclude with IT vendors contain a change-of-control clause granting the right to either (i) terminate the agreement; (ii) renegotiate specific contractual terms; or (iii) revise pricing and licencing models Accordingly, it is also recommended companies maintain proper oversight over which of their contracts contain change-of-control clauses, what the triggering events are, and planned contingencies in the event that the change-of-control clause is triggered

Be prepared for Paia and Popia compliance checks

Wilmari Strachan & Naledi Ramoabi ENS

In the past few months, the information regulator has intensified efforts to investigate and enforce compliance with data privacy and protection laws among responsible parties

In terms of section 77H(1) of the Promotion of Access to Information Act (Paia), read with sub-regulation 14(2) of the Paia regulations, and section 40(1)(b)(vi) of the Protection of Personal Information Act (Popia), the information

regulator has the power to conduct compliance assessments on its own initiative or on request, to determine whether a responsible party generally complies with the provisions of Paia and Popia It has been almost three years since Popia came into force and it is assumed that organisations have had ample time to get their ducks in a row when it comes to Popia and Paia compliance But have they? Ensuring compliance within an organisation is the responsibility of the information officer who can be held personally liable

for gross infringements of Paia provisions It is important that information officers are adequately equipped to take on the role

Besides implementing and publishing a Paia manual as well as drafting and adopting a privacy policy, there are other things that need to be done to ensure compliance

With so many developments that take place with processing data, an information officer has to be proactive and regularly complete compliance exercises It may be nerve-wracking to receive a notice of assessment, but it

is not difficult to show an organisation is compliant

During a compliance assessment, you can expect the information regulator to request the following to demonstrate compliance:

● The organisation s Paia manual prepared in line with regulations

● The organisation s Popia compliance framework and impact assessments

● Whether a designated information officer or a deputy information officer has been appointed

● Policies in place to help ensure data protection

● Procedures in place that are aligned with industry practice regarding processing personal information lawfully

● Proof that the organisation submitted its annual report to the information regulator in terms of section 83(4) of Paia

● Proof that employees have been provided with Popia and Paia training

This list does not encapsulate all that is required to prove that an organisation is complying with data protection laws, but it is a starting point

There seems to still be

apathy towards regulators in SA and regulators enforcement powers under various statutes However, the information regulator s latest initiatives have shown that it has both bark and bite

These compliance assessments are good reminders that compliance is not just a tick-box exercise, nor is it a one-off event

As such, organisations need to stay ready in case the information regulator comes knocking on their organisation s door because it is no longer a matter of if but when

Misconduct under the microscope

• An internal investigation is often triggered by a specific event, such as theft of company data

Candace Lategan, Steven Powell, Linda Sheehan, Coleta Wesso & Andrew Keightley-Smith ENS

The terms “fraud” , “bribery” and “ corruption” have sadly become all too familiar for many South Africans It’ s hard to go a day without hearing of yet another fraudulent or corrupt scheme

Since the release of the findings from the Commission of Inquiry into State Capture (colloquially known as the Zondo Commission) and SA’ s recent “greylisting” by the Financial Action Task Force (FATF), scouring fraud and corruption-related media reports has become something of a national pastime However, these problems are not confined to SA or any particular industry or sector They are, in fact, global concerns International regulators are becoming more visible and taking an active role in combating fraud, bribery and corruption

In 2021, Goldman Sachs Group topped the list of the largest sanctions ever under the Foreign Corrupt Practices Act (FCPA), following a $3bn settlement with the US Department of Justice and Securities and Exchange Commission Former senior

employees accused Goldman Sachs of paying more than $1 6bn in bribes to third-party intermediaries and highranking government officials in Malaysia and the UAE Regulators such as the US Department of Justice, Securities and Exchange Commission, the UK Serious Fraud Office and the French National Financial Prosecutor’ s Office are imposing sig-

TYPICALLY, INTERNAL INVESTIGATIONS ARE CARRIED OUT BY A DESIGNATED TEAM WITHIN THE ORGANISATION

nificant sanctions on persons and companies found guilty of fraud, bribery and corruption

These international regulators are also collaborating with each other more closely than ever For instance, collaborative efforts of the US, UK and French regulators culminated in the $4bn corruption settlement with Airbus Importantly, the ripple effects of fraud, bribery and corruption are not restricted to large corporations or multinational enterprises Small businesses, too, can become embroiled in these

Increase in

The earnings threshold increased to R254,371 67 with effect from April 1 2024, entitling employees falling below the threshold to stricter protections in terms of labour legislation

It is the fourth consecutive annual increase to the threshold (following a period of seven years without any adjustment) and sees the threshold increase by R13,261 08 from the current earnings threshold of R241,110 59

The earnings threshold, a determination in terms of

issues, suffering potentially devastating consequences

An internal investigation refers to the process adopted by a company or entity to probe and uncover potential misconduct committed by management, employees or third parties

The following are some examples of events that may necessitate an internal investigation:

● Stock theft/IP theft

● Conflicts of interest/misuse of company assets

● Procurement fraud/payment of bribes or kickbacks

● Employee misconduct, including sexual harassment, bullying, nepotism and so on

● Fraud/embezzlement

● A data breach

Essentially, an internal investigation is an inquiry into allegations of misconduct, unethical behaviour, policy violations, fraud or any other matter that may pose a risk to the organisation’ s integrity or reputation Typically, internal investigations are carried out by a designated team within the organisation but often independent external persons may be involved

An internal investigation is often triggered by a specific event, such as the belief company data has been stolen by a current or former employee

This is more common than one may realise because intellectual property is a

KNOWLEDGE IS POWER

desirable and valuable commodity It could take the form of a client list, a contract template or the formula to your most popular (and lucrative) product There are many red flags to look out for, including an employee’ s abrupt departure from the company; a former employee’ s new employment with a competitor; or a data leak or unauthorised access to company records

Receipt of a tip-off/ whistle-blower allegation

Whistle-blowing plays a vital role in encouraging accountability, transparency and good governance However, it’ s important to navigate potential challenges associated with whistle-blowers, ensuring disclosures are made in good faith and not for personal gain In SA, whistleblowers are protected by the Protected Disclosures Act 26 of 2000, which aims to encourage whistle-blowing in the workplace and makes it easier to disclose information about criminal and other irregular conduct Although whistle-blower complaints can be a valuable source of information, companies need to be mindful of the potential challenges when dealing with such complaints

External data breeches

Data breaches are becoming

more and more common in today’ s digital environment

An internal investigation may be needed to investigate the source of the breach and identify control weaknesses

Being the subject of adverse media

When adverse information is published about a company in the media, irrespective of whether there is any merit to the published article or allegations, a company must be seen to take complaints and allegations seriously As with managing a whistle-blower complaint, it is good practice

WHISTLE-BLOWING PLAYS A VITAL ROLE IN ENCOURAGING ACCOUNTABILITY, TRANSPARENCY AND GOOD GOVERNANCE

to launch an internal investigation to help the company understand whether there is any truth to the allegations and how best to manage the situation

Increased regulatory scrutiny within the industry or jurisdiction in which a company operates

Regulators often conduct periodic reviews of different industries As a result, companies that operate within those industries or jurisdictions come under increased scrutiny

Changes in legislation may also bring about heightened regulatory scrutiny Companies may be required to investigate to ensure they are operating in compliance with updated legislative frameworks

Red flags or malfeasance identified through audit checks

Often auditors or routine checks may reveal red flags or possible malfeasance which may warrant a more comprehensive internal investigation

Internal investigations serve numerous purposes, including mitigating and recovering financial losses, safeguarding a company ’ s credibility and reputation, and maintaining consumer trust and investor relations

Internal investigations also play a significant role in minimising ongoing risks

Allowing a culture of overlooking misconduct creates opportunities, justifications1 and motivation for others within the company to engage in fraud or violate company policies

earnings threshold is now in effect

section 6(3) of the Basic Conditions of Employment Act (BCEA), impacts the applicability of certain of the provisions of the BCEA, the Labour Relations Act (LRA) and the Employment Equity Act (EEA)

Employees who earn above the threshold are not entitled to certain of the protections afforded to those employees earning below the threshold

Sections of the BCEA regulating ordinary hours of work, overtime, meal intervals, daily and weekly rest periods, Sunday pay, pay for night work and pay for work on public holidays only apply

to employees earning below the threshold

Employees earning above the threshold are not subject to the deeming provisions that apply to temporary employment services (labour brokers) and fixed-term employment provisions under the LRA

Employees earning above the threshold are not allowed to refer disputes relating to unfair discrimination under the EEA to the CCMA for arbitration unless it is related to sexual harassment or all parties agree to arbitration Such disputes must proceed to the Labour Court for adjudication

The determination delineates that which is to be included in the definition of earnings for purposes of calculating whether an employee falls above or below the earnings threshold and an understanding of this is essential in seeking to minimise the risk of noncompliance with the BCEA Importantly, earnings in this context must be differentiated from that which may other-

IT IS THE FOURTH CONSECUTIVE ANNUAL INCREASE TO THE THRESHOLD

wise be included in remuneration in terms of the ministerial determination regulating the calculation of employees remuneration in terms of section 35(5) of the BCEA

The increase to the earnings threshold may result in an increase or decrease in the number of employees entitled to the stricter protections afforded to such employees in labour legislation, such as overtime payments This is dependent on the extent of increases awarded to employees during the past year and potentially where in the remuneration review cycle an employ-

er is This may, in turn, have financial consequences for employers

It is appropriate employers review their remuneration structures to account for the change and the associated costs Equally, employers that make use of atypical employment arrangements must review such arrangements (or require a review by any temporary employment service facilitating such arrangements) to ensure ongoing compliance with the BCEA and, where necessary, to avoid the consequences of deeming provisions under the LRA becoming applicable

Brett Abraham & Mehnaaz Bux Webber Wentzel

BUSINESS LAW & TAX

Dealmaking rebound is possible

• Interesting signs of bubbling activity in the M&A space

PKF Octagon

Just when we thought loadshedding was getting more manageable, a new wave of power cuts came to darken hope And then, when positive economic sentiment was building, severe port congestion stopped everything in its tracks

Transnet’ s tracks remain broken and, together with rampant crime and corruption, you would think investors are heading for the hills Yet, there are some interesting signs of bubbling activity in the M&A space that could indicate better tidings in 2024

Recent Boston Consulting Group (BCG) research says African deal value in the first half of 2023 was $4bn a 73% drop from the first half of

2022 versus a 45% decline globally However, the steep year-on-year decline masks the emergence of an active M&A market over the past decade that should promote continued strength Since hitting its lowest point in the first quarter of 2023, global M&A activity is showing signs of revival, says BCG

In Africa, the market’ s downturn can be traced to the second half of 2022, when the region’ s total deal value fell to $6bn a sharp 62% decline This followed all-time highs in 2021 when deal values exceeded $44bn, so there is a lot of catching up to do

For the period from January to end-September 2023, local deal activity declined 26% year on year, and almost 40% when compared with deal activity in 2021, according to DealMakers data Pri-

JOINING FORCES

vate equity, an important driver in the dealmaking space, even declined 36% on the previous year Yet there are several sectors in high demand in Africa For instance, in 2022 the renewable energy sector attracted a record-breaking $118bn in foreign direct investment (FDI), representing more than 60% of total FDI inflows to Africa, accord-

ing to BCG This level of demand continued in 2023 and will continue into 2024, in our view, as green solutions to climate change are sought more broadly Mining, technology and health are other key sectors to watch As for countries, in 2022 and the first half of 2023, the most active countries in the region in M&A volume and value were SA and Egypt, fol-

TAXING MATTERS

lowed by Nigeria and Kenya

SA remains on the M&A radar as a gateway into Africa One look at the negative headlines may raise questions of whether this will hold true for much longer but, despite its weaknesses, SA has an extremely robust and sound financial system The commercial dispute resolution processes are also world-class

Despite its own challenges including greylisting by the FATF SA has not been plagued by issues such as debt defaults and currency liquidity challenges afflicting many other countries

SA regulators have also been quite efficient in assessing deals requiring their approval, though on-theground expertise remains crucial to overcoming ongoing due diligence and regulatory hurdles It is notable that several deals failed in the past year because of capacity, resource and other constraints

In this environment of both risk and reward, it is imperative that companies investigate potential opportunities carefully, and analyse the risks and threats and do significant deep dives into industries A detailed understanding of the benefits and the challenges involved, based on expert input, will be key

At the end of the day, corporates, private equity funds and family offices are also sitting on a lot of cash to deploy in 2024, so any opportunity will be snapped up We expect 2024 to be positive on the M&A front as a result However, the local market will also be affected by the upcoming national and provincial elections as investors might want to wait and see what the outcome is, which might slow deal activity in the first and second quarter of this year We also cannot overlook the potential impact of ongoing geopolitical tension

Turnover tax: small businesses’ barriers to entry

Year after year, South Africans hear statements by government officials that small businesses are the key to growing SA’ s economy and, from a fiscal perspective, growing the tax base Research, however, indicates that small businesses face many obstacles, such as relatively high tax compliance costs relative to their turnover This is due to the generally high fixed costs associated with systems necessary to comply with the requirements of the tax system The reality is that many small businesses are outside the income tax net either because they generate small profits or because they are overwhelmed by the tax system In 2009, a turnover tax system for micro businesses with a turnover of up to R1m per annum was implemented This instrument effectively replaces income tax, capital gains tax (CGT), dividends tax and value-added tax (VAT) for qualifying micro businesses Payroll taxes such as PAYE and UIF contributions are excluded as they are taxes generally borne by employees and collected by employers on behalf of the state Sections 48 and the Sixth Schedule of the Income Tax Act No 58 of 1962 regulate turnover tax payable by micro businesses According to the SA

Revenue Service (Sars), the benefits of turnover tax for a qualifying micro business include reduced levels of record-keeping, simplified compliance requirements, reduction in costs of accountancy services and, possibly, a lighter tax burden as the system has its own tax scales and turnover tax effectively replaces CGT and VAT

Specific disqualifications from turnover tax system

Paragraph 3 of the Sixth Schedule lists the persons who do not qualify as a micro business and who are therefore not allowed to make use of the turnover tax system

One of the exclusions is where a person renders a professional service during the year of assessment

Professional service is defined in paragraph 1 of the Sixth Schedule as a service in the field of accounting, actuarial science, architecture, auctioneering, auditing, broadcasting, consulting, draftsmanship, education, engineering, financial service broking, health, information, technology, journalism, law, management, real estate broking, research, sport, surveying, translation, valuation or veterinary science

The list is quite extensive but can also be seen as vague The explanatory memorandum issued in

2009 in respect of the turnover tax system goes on to say that the exclusion of “professional service” from the definition of a micro business is an anti-avoidance measure to protect the employment income tax base and that such professional services are generally rendered by more sophisticated, high-income earning taxpayers, with profit margins significantly higher than those assumed in the design of the turnover tax

The definition of professional service thus poses a potential interpretation problem It begs the question of how professional one s service must be for it to be classified as professional for purposes of the Sixth Schedule And how sophisticated must a taxpayer be before his services will be considered professional? Only a list of certain activities is given in the Sixth Schedule, which is seen as professional, such as sports, health, information technology and so on However, none of these

THE LEGISLATURE NEEDS TO SET CLEAR AND UNAMBIGUOUS PARAMETERS

REGARDING THE DEFINITION OF ‘PROFESSIONAL SERVICE

activities is clearly defined in the Income Tax Act The question thus arises of how wide (or narrow) those activities should be interpreted In other words, what is the scope of the given definition?

The following two authoritative English dictionaries define the word professional as follows: The Oxford Paperback Dictionary (Fourth Edition) professional adjective

1 of or belonging to a profession or its members

2 having or showing the skill of a professional

3 doing a certain kind of work to make a living noun

1 a person working or performing for payment

2 someone highly skilled Collins English Dictionary (Fifth Edition) professional adjective

1 of, relating to, suitable for, or engaged in as a profession

2 engaging in an activity for gain or as a means of livelihood

3 extremely competent in a job, etc

4 undertaken or performed for gain or by people who are paid noun

1 a person who belongs to or engages in one of the professions

2 a person who engages for his livelihood in some activity

3 a person who engages in an activity with great competence

Looking at the definitions, it is clear there are different degrees to which a person could be deemed professional, ie membership to a profession, some acquired skill, and even mere participation in an activity The following questions arise if one should analyse the definition of professional as given by these dictionaries

Does this mean that a person should have some specific qualification? And if so, should the qualification be obtained from a specific institution?

Will this qualification result in the person being highly skilled ? Must the person rendering the service be a member of an accredited institution? What then will be deemed a proper qualification and/or level of accreditation that will satisfy the criteria set by the Sixth Schedule?

Furthermore, what requirements must an institution meet for it to be deemed accredited or professional ? Is there the proverbial litmus paper test that will determine whether a service is professional?

In ITC 12860, it was held that carrying on a professional activity required a particular qualification and, in many cases, a licence, certificate or membership of a professional body before the

person concerned could participate in that activity At present, there are no clear and unambiguous answers to these questions

As “professional service” is currently defined, it seems that any service rendered in any of the activities listed can be deemed professional, ignoring levels of qualification, accreditation and even definitions of the activities themselves If one follows the definition of professional service in the Sixth Schedule, the mere fact a service has been rendered in the field of one or more of the listed activities makes that service professional

The scope of the definition seems, without a doubt, to be too wide and too vague The legislature needs to set clear and unambiguous parameters regarding the definition of professional service to dispose of any uncertainties regarding its scope and meaning

So, if you as a taxpayer are rendering a service, you must ask yourself whether your service is considered professional enough to exclude you from the turnover tax system and be able to benefit from it When in doubt, it is best to seek professional tax advice

/123RF ASTIMAK

BUSINESS LAW & TAX

Firm feels wrath of regulator

• First enforcement notice issued against nuisance direct marketing firm — but will it work?

Ahmore Burger-Smidt & Dale Adams Werksmans

The Information

Regulator issued its first enforcement notice regarding noncompliance with the direct marketing provisions of the Protection of Personal Information Act 4 of 2013 (Popia) against FT Rams Consulting

Of importance is what the enforcement notice practically means for the direct marketing industry What is the extent and impact of the enforcement notice, the intended and unintended consequences? Has the record been set straight, or not?

The enforcement notice was issued following a complaint from a data subject of countless direct marketing messages, particularly emails, received from FT Rams despite multiple attempts by the data subject to opt-out and requests to be removed from the emailing list of FT Rams

FT Rams was ordered, among other things, to “immediately stop sending unsolicited direct marketing messages by means of any electronic communication, including telephone, fax, SMS, email or automated calling machine, to any data subject who has not consented, including the complainant”

The regulator found that FT Rams ignored the opt-out requests from the data subject and, as a consequence, contravened the conditions for the lawful processing of

personal information and section 69 of Popia It was found that FT Rams contravened sections 69(1)-(2) of Popia by transmitting to the data subject, without first obtaining their consent, persistent direct marketing communications through emails and not using the prescribed form to obtain the data subject’ s written consent

The enforcement notice comes about at a time when various statements have been made about whether a telephone call constitutes an electronic communication For example, recently, the chairperson of the Regulator, Advocate Pansy Tlakula, remarked that “I can reveal

STATEMENTS HAVE BEEN MADE ABOUT WHETHER A TELEPHONE CALL CONSTITUTES AN ELECTRONIC COMMUNICATION

here that we ’ ve taken [a decision] that a telephone is a form of electronic communication Telemarketing will then come within Section 69 of Popia because these telephone calls have become such an inconvenience They annoy everybody, including me ” Taking a step back and getting back to the basics what does Popia say?

Popia defines electronic communications as “ any text, voice, sound or image message sent over an electronic communications network

which is stored in the network or in the recipient’ s terminal equipment until it is collected by the recipient” By this definition alone:

● Emails are clearly included within section 69(1)-(3) of Popia as the marketing message is stored in the network or in the recipient’ s terminal equipment In fact, section 69(1) itself deliberately mentions emails as a form of electronic communication; and

● Live telephone calls are, however, not stored in the network or in the recipient’ s terminal equipment except if one leaves a message

The above begs the question of the extent to which telemarketing constitutes a form of direct marketing in terms of section 69 of Popia

The catch-all ground is section 69(4) of Popia which provides that, duly emphasised, “Any communication for the purpose of direct marketing must ” Section 69(4) thereafter sets out an opt-out regime in terms of which the direct marketer must disclose its identity and contact details to which the recipient may send a request that such communications cease The wording of section 69(4) is important It refers to all communications and not electronic communications

The regulator is established pursuant to enabling legislation and equipped with the task of overseeing, monitoring and enforcing Popia and its regulations The regulator is bound by the provisions of Popia and the Promotion of Access to Information Act 2 of 2000 in the exercise of its powers and functions It is an administra-

tive body and is also bound by the requirements for valid administrative action set down in the Promotion of Administrative Justice Act 3 of 2000 (PAJA)

The role of the regulator is therefore important for the proper governance of data privacy matters in SA The regulator must carry out its functions without fear, favour or prejudice

The functions of the regulator and legislature complement each other; however, they serve different roles within the legal system The legislature is responsible for law-making and policy setting This accords with section 43(a) of the Constitution of SA, 1996 which vests the legislative authority of the national sphere of government in parliament This confers on the National Assembly the power to consider, pass, amend or reject any legislation before the National Assembly and to initiate or prepare legislation

Being an administrative body that is accountable to the National Assembly, all administrative actions and decisions of the Information Regulator must be executed in a lawful, reasonable and procedurally fair manner If this is not the case, then the action or decision of the administrative body is subject to judicial review in terms of PAJA

THE ROLE OF THE REGULATOR IS IMPORTANT FOR THE PROPER GOVERNANCE OF DATA PRIVACY MATTERS IN SA

Can a regulator therefore create the law?

The regulator expects litigation in relation to its interpretation and Adv Tlakula remarked that: The rules are

very clear but I think with direct marketing my sense is that we ’ll probably end up being in court They will wait for the time when there is a complaint and once we decide against them, they’ll probably take us on review and the issue of whether a telephone is electronic communication or not will come to the fore ”

It has been reported that the regulator will issue a Guidance Note on Direct Marketing by Means of Unsolicited Electronic Communications To this end, Adv Pansy Tlakula remarked that that is why we needed to take a decision and it took us a long time to take that decision when we finalised the direct marketing guidance note We took a decision to say once and for all that a telephone is an electronic communication

Can the regulator read the word telephone into the definition of electronic communications? Time will tell