BD Business Law & Tax (March 2024)

LAW & TAX

A REVIEW OF DEVELOPMENTS IN CORPORATE AND TAX LAW

ANC records’ legal minefield

• Cardre deployment records may spark labour-related disputes

Evan Pickworth Business Law & Tax Editor

The political mudslinging over the release of the ANC cadre deployment records is intensifying While the political noise factor is high over the missing records when President Cyril Ramaphosa was in charge of the ANC deployment committee between 2013 and 2017, lawfare is on the rise and many legal ramifications still exist

Whether a ravenous dachshund, a lost laptop or simply poor record-keeping are to blame, the DA had, at the time of writing, issued a letter of demand towards filing a contempt hearing for the release of these records

Criminal charges are also on the table for officials the DA claims were involved in destroying these records The ANC has, however, claimed cadre deployment is applied all over, and it has complied with the Constitutional Court order and has asked the DA to release its own records

The Gauteng High Court recently dismissed with costs the application by the DA to have the ANC’ s cadre development policy and deployment strategy declared

unconstitutional It said the DA had misinterpreted the Zondo report and that there was no common cause that the ANC policy has resulted in corruption, maladministration and state capture It said influencing government decisions is different from political meddling in government affairs Either way, this will likely be appealed to the Supreme Court of Appeal or even directly to the Constitutional Court

Remember, Ramaphosa told the Zondo commission in April 2021 that he could not recall minutes having been kept during the period he helmed the committee The ANC has said cadre deployment should not be inconsistent with the principles of fairness, transparency and merit in appointing individuals to public entities “Cadre deployment cannot be faulted in principle; it is a common feature of democratic prac-

CRIMINAL CHARGES ARE ON THE TABLE FOR OFFICIALS THE DA CLAIMS WERE INVOLVED IN DESTROYING THESE RECORDS

tice worldwide But we would concede that there are weaknesses in its practical implementation that make the case for greater clarity, both within political parties and the state ”

Yet part 6 of the Zondo report claimed the practice was unconstitutional and illegal and should not exist Minutes, subpoenaed by the commission, had already found that, quite apart from claims it did not interfere with judicial appointments, the committee had made recommendations on preferences

for judges

Members are, in fact, “ recommended” across many fields, some which are government-specific though where broad civil society mandates should trump party loyalties and others that are more concerning, such as education or roads, rail and power, where weak appointments have left terrible marks on society

What should be kept in mind is that the Constitutional Court has already delved into this matter when it dismissed the ANC s application for

leave to appeal a judgment requiring it to hand over its cadre deployment records

The ANC was told earlier in February to also hand over all minutes, CVs, email threads, WhatsApp discussions and other relevant documentation relating to its cadre deployment committee dating back to 2013, by Monday February 19

While the disclosure documents have not been open to the public, the state capture commission report, part VI volume 2 has stated the following regarding the employment practices and minutes of the deployment committee: “Many minutes scrutinised by the commission show that the committee did consider loyalty and party membership when evaluating candidates This would give an unfair advantage to ANC members, which would effectively contravene section 197(3) of the constitution, which states that ‘No employee of the public service may be favoured or prejudiced only because that person supports a particular party or cause ’ ”

So there is the legal rub of the situation Jan Norval, employment executive at ENSafrica, makes the important point that the disclosure documents are likely to be carefully scrutinised by unsuccessful public service candidates, looking to see whether the decisions of the

deployment committee affected their application for a position

“Organs of state and possibly SOEs may be referred to bargaining councils and the CCMA relating to unfair labour practices regarding promotion, or face claims of unfair discrimination based on political opinion or other

THE LABOUR RELATIONS ACT PROVIDES THREE REASONS FOR A FAIR DISMISSAL: MISCONDUCT, INCAPACITY AND OPERATIONAL REQUIREMENTS

grounds, should unsuccessful candidates perceive unfair influence on their application by the deployment committee,” he says

The Labour Relations Act provides three reasons for a fair dismissal: misconduct, incapacity and operational requirements If an employee s employment is connected to the disclosure documents and they can perform their duties satisfactorily, they cannot be fairly dismissed for incapacity because their capacity to perform their duties is not at issue

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PAPER TRAIL

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ANC records’ legal minefield

CONTINUED FROM PAGE 1

“Employers may also find it difficult to categorise an operational requirement which would justify the dismissal of an employee whose employment is connected to the disclosure documents If the employee was somehow involved in his appointment through the deployment committee, and not just an innocent beneficiary of the appointment, then a dismissal for misconduct could be fair,” says Norval

When all is said and done, organs of state and possibly SOEs are likely to face new employment-related disputes stemming from the disclosure documents, and they will have to prove that appointments to the implicated positions were fair

Any terminations of employment stemming from the disclosure documents, or the possible declaration of cadre employment as unlawful (on appeal), would also require employers to demonstrate the dismissals were not just lawful, but fair

LATERAL THINKING

Mr Minister, a tip on NHI

• Hopefully, he has listened to views that the process is rushed and too ambitious

Evan Pickworth BD Law & Tax Editor

Iremember when I covered the budget as a reporter more than a decade ago and always found the Tips for Trevor section thought-provoking

There is no doubt they are taken seriously, and while many of these may not pass legislative muster, being far too subjective, it was good to see current finance minister Enoch Godongwana take a leaf out of Trevor’ s book and ask for budget tips ahead of walking the tightrope which would be the 2024 budget

The jury is out on whether the budget got everything right, but I think the minister is listening to the masses and

knows that SA’ s taxpaying public cannot simply be taxed into oblivion

The budget hit the right notes on fighting corruption and fixing lumbering parastatals Of course, coming in an election year, it also neglected to hit taxpayers with higher rates but did knock higher earners as there is no adjustment for inflation, while it found money to cover the increase in the public sector wage bill Instead, it raided R150bn from the gold & foreign exchange contingency reserve account to assist in

paying down debt but it is only a temporary fix Increased revenue collection will come only when the economy is fixed and policy at this stage remains woefully short

Some ambitious schemes are recipes for disaster For instance, while President Cyril Ramaphosa is “looking for this pen ” to sign the National Health Insurance (NHI) Bill into law, the silence on the implementation of NHI was almost deafening in the budget Apart from all the gung-ho talk from many in government, the minister was far more sanguine, ensuring systems are working first I daresay, he may be listening to some of the “tips” from the public and media that the approach to NHI until now has been too rushed and too ambitious, notably as to who will pull and control the purse strings of such a huge enterprise Surely, no one civil servant answering to the government as a shareholder should have this much power look at what has happened at Eskom, and we are left with no doubt that this is a

bad idea The NHI was only really mentioned in the budget to the extent that it cannot be rolled out at scale yet, and more effort will go into improving the public healthcare system

Paul Gering, tax partner, PKF Durban, points out that any move to NHI will surely impact medical tax credits Therefore, you would have expected some initial announcements on how this transition will work or where the significant funds needed to make this new system work will come from Yet the budget did not mention phasing out medical tax credits at all This phasing out is important as it will need to happen to ensure the money is shifted to the NHI So, fortunately, no such major move yet, or even a hint of it

MEDICAL

TAX CREDITS ARE NONREFUNDABLE REBATES USED TO REDUCE THE NORMAL TAX A PERSON PAYS

All that was said was that the medical tax credits will not be adjusted to account for inflation: they will remain at R364 a month for the first two members and R246 a month for additional members There is also no mention of any specific tax to fund NHI Medical tax credits are nonrefundable rebates used to reduce the normal tax a person pays At R364 a month for the taxpayer who paid the medical scheme contributions, these rebates are significant to many people as they mean direct savings when pockets are severely cash-strapped

Gering says you would have expected these credits to already have been capped considering NHI

Is the lack of an increase in these credits in 2024 a warning of things to come? Without guidance we cannot be sure if their termination is pending But we certainly hope the minister continues to read his “tips” , especially when it comes to the realities of trying to implement a scheme this large based on the political whims of others

A new twist in workplace suspensions

Nomampondo Banzi & Devyani Ghelani ENSafrica

There are two types of suspension recognised in our law: precautionary and punitive suspensions

Precautionary suspension is implemented as a preventive measure pending an investigation and/or disciplinary proceedings in relation to an employee’ s alleged misconduct, during which an employee is paid

Punitive suspension is implemented as a form of punishment further to an employee having been found guilty of misconduct An employee is not paid during this type of suspension

However, there are awards by commissioners of the Commission for Conciliation Mediation and Arbitration (CCMA) where suspensions have been considered in another context, for example where the dilatory conduct of the employee and/or their legal representative frustrated the expeditious finalisation of the disciplinary process

This issue was considered by the Labour Court in Mark Strydom v ArcelorMittal South Africa Disciplinary proceedings were initiated

TO THE LETTER OF THE LAW

against Strydom on January 31 2023 However, numerous postponements ensued and by February 2024, the process had still not been finalised

The employer took the view that this was due to the dilatory tactics of the employee and his represen-

IT SIGNALLED THAT IT MAY BE HIGH TIME THAT UNPAID SUSPENSION BE INSTITUTED IN THESE CIRCUMSTANCES

tative and, on the strength of the abovementioned awards, decided not to pay Strydom while the disciplinary process continued

JURISDICTION

Strydom then approached the labour court on an urgent basis claiming that his suspension was unlawful He had also referred an unfair suspension dispute to the Metal and Engineering Industries Bargaining Council

The court found it lacked jurisdiction to consider the dispute It did so on the basis that it could not consider a claim that the employer had

acted unlawfully It also did not have jurisdiction to consider what was, in effect, a dispute dealing with alleged unfair labour practice in the form of a suspension

However, during the course of its judgment, it made various points

It reiterated the view expressed in a number of decisions to the effect that the drafters of the Labour Relations Act (LRA) envisaged expeditious disciplinary proceedings and contrasted this principle with the approach adopted in this case It also criticised Strydom for approaching the

labour court for relief in circumstances where the disciplinary proceedings were still under way

Most importantly, while the court accepted that, besides the CCMA arbitration awards, there is currently no authority entitling employers to place employees on unpaid suspension due to dilatory conduct during disciplinary proceedings, it signalled that it may be high time that unpaid suspension be instituted in these circumstances

UNFAIR

The court remarked that where an employee s paid suspension is extended for an unreasonably long period due to an employee s requests for postponements or dilatory conduct by the suspended employee, it would be unfair to apply the general principle that a suspended employee is entitled to full pay The fairness of this approach would depend on the facts of each case

The court appears to accept the notion that an employer s refusal to pay an employee their salary in the circumstances mentioned above constitutes a fair suspension as envisaged in section 186(2)(a) of the LRA

The question may, how-

ever, be asked whether the refusal to pay in these circumstances falls within the definition Or does it not render the unpaid “suspension” a “disciplinary action short of dismissal” as defined?

This decision serves as a reminder of the following:

● Disciplinary hearings should be concluded swiftly and with minimal legal technicalities; and

● Approaching the labour court under the guise of unlawful conduct by the employer will not allow litigants to bypass the established LRA dispute resolution route that could attract the imposition of legal costs

It should be remembered, however, that an unlawfulness claim based on a breach of contract may still be entertained by the labour court

● Reviewed by Peter le Roux, an executive consultant in ENS s employment practice

DISCIPLINARY HEARINGS SHOULD BE CONCLUDED SWIFTLY AND WITH MINIMAL LEGAL

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Audiovisual industry’s fate in the balance

• Proposed new bills’ ‘ one size fits all’ approach poses serious threat to thriving creative industry

Bobby Amm Commercial Producers Association of SA

In their final step to becoming law, the latest versions of the Copyright and Performers’ Protection Amendment Bills are scheduled to be deliberated on by the National Assembly after their approval by the portfolio committee, over the objections of the opposition members

If the bills are adopted by the National Assembly, which looks increasingly likely, they will be sent to the president for assent

The bills have been the subject of controversy since they were first introduced into parliament seven years ago One of the main criticisms of the bills is that they seek to adopt a “ one size fits all” approach to a number of highly complex and nuanced issues for industries which operate in vastly different ways, even though they are all classified as “creative”

The issues have been hotly debated in the music and publishing industries, while less attention has been given to the audiovisual sector incorporating film production, advertising, animation and the service industries that support them

The proposed legislation

presents several challenges to this rapidly growing sector that the government has recognised as a key driver of job creation and small business growth

The primary issue is the proposal of placing performers at the same level as producers who create audiovisual works, so they share in the profits derived from the commercialisation of audiovisual works

THE WARNING HAS ALREADY BEEN SOUNDED TO PARLIAMENT BY INTERNATIONAL PRODUCERS, STUDIOS AND STREAMERS

Interestingly, the legislation does not recognise creative people working behind the scenes directors, cinematographers, editors and production designers in the same way

By comparison, performers often have little to do with the production of audiovisual works given that they usually only become involved towards the end of the process and work exclusively in front of the camera

Producers of audiovisual content were troubled to read the latest versions of the bills passed by the National Council of Provinces in September 2023, which state producers and performers will need to pre-negotiate a share of royalties or “equitable remuneration” If agreement can ’t be reached, the dispute must be referred to a tribunal of retired judges This is hardly a practical solution given the quick turnaround at which content is created in the highdemand environment

The producer must register each act of commercialisation of an audiovisual work (in a yet unspecified procedure that will appear in ministerial regulation) with the appropriate collecting society, and must presumably make financial records available for the collecting society to scrutinise to establish the correct amounts due to each performer

Any person failing to comply will be guilty of an offence and subject to a fine or imprisonment (not exceeding five years) or both If the party is a company, it will be fined a minimum of a staggeringly excessive 10% of its annual turnover

What does all this mean in practical terms? Let s take the advertising industry as an example The industry is

LIGHTS, CAMERA, ACTION

robust, competitive and produces content at a fast pace An estimated 6,000 pieces of advertising material are produced in SA every week

The industry recognises the role of performers by paying them “usage fees” for the use of their image to sell the marketer’ s product Performers are paid a “daily performance fee” and then also the usage fee (based on the duration and territories in which the commercial will be broadcast) and renewals for every additional year the commercial is flighted at an agreed on escalation

For example, a featured (recognisable) performer may be paid R5,000 for one shooting day and then 200% for a year ’ s usage in SA, amounting to R15,000 for a day’ s work If the commercial is to be broadcast worldwide, the usage fee will increase to 1,600% and the performer will earn R85,000 If the commercial is renewed for a second year, the performer will be paid the same amount again, plus the agreed on escalation (usually between 10% and 25%)

In terms of the bills, a new share of royalty or equitable remuneration must be paid in addition to the usage fee if the usage fee does not also cover all exploitation rights conferred by the acts, once

amended, from which performers are meant to benefit

The uncertainty created by this “world-first” legislative approach introduces increased risk to the advertising industry Unfortunately, the department of trade, industry and competition never conducted the required economic impact assessment study of the consequences of this legislation in the advertising sector

As a result, there is a real risk the industry’ s clients will look to other options This could possibly take the form of using other media platforms on which to spend their advertising budgets

OTHER OPTIONS

Alternatively, they could look at increasing the number of imported commercials or producing advertising outside SA in the many valuefor-money production centres which have sprung up to service markets where production is either too expensive or too onerous Technology may also play a role as it becomes easier to generate imagery in this cutting-edge field

The legislation will be a game-changer for SA’ s lucrative “service industry” , which attracts both advertising practitioners and filmmakers from around the world The

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unfriendly legislation will be negatively perceived by international partners who will find the reasoning (or rather lack thereof) difficult to comprehend

The warning has already been sounded to parliament by international producers, studios and streamers at the parliamentary hearings, but the department kept its head firmly in the sand and believes any criticism is simply hot air and that the industry will continue to grow regardless of the obstacles it places in its way

While some actors associations have been advocating for the bills because they have been led to believe they are going to be paid additional royalties, they have offered a simplistic version of what the legislation entails, leaving out the potential hazards

On the other hand, thousands of freelancers, behind and in front of the camera, and hundreds of companies providing services to the industry will be negatively affected by these and other provisions in the bills

The stakes are high as the bills pass through the National Assembly Not only performers stand to lose if the gamble does not pay off The future of SA’ s entire audiovisual industry hangs in the balance

Legal practitioners urged to help reduce court delays

Aslam Moosajee

ENSafrica

The deputy judge president of the Johannesburg high court issued a circular last month urging legal practitioners to carefully consider their approach when seeking hearing dates

The court remains committed to delivering an efficient litigation service to the public

While for most other matters, hearing dates are allocated within reasonable times, the lead times for the allocation of civil trial dates are unreasonably long In some instances, trial dates for civil trials are allocated as far

as three years This long delay is attributable to the fact that the volume of cases set down cannot be heard sooner by the number of available judges or acting judges

The deputy judge president plans to convene a meeting with the leadership of the legal profession to address the issues implicated in such long delays

According to the circular, the reason for the lengthy delays are as follows:

● Matters that are not genuinely ripe to be set down for hearing are being set down for hearing, preventing other more deserving cases from being heard promptly This results in a backlog, affecting

availability of hearing dates for other cases

● Parties and their legal practitioners are not making genuine efforts to settle matters early which the deputy judge president describes as a blot on the profession

● The duration of cases are also not accurately estimated and there is a concern that exaggerated estimates are being provided, which then unfairly eats up the available slots for allocation The deputy judge president has called on legal practitioners to cut down the expected duration of the case to what is truly in dispute, which would save valuable court time for other litigants In the circular,

the deputy judge president says court time is a scarce and valuable resource and therefore a court endeavours to ration court time fairly

The lead times to set matters down are as follows:

● One to two terms from the moment of applying for a date for hearing for full court civil appeals;

● One term from the moment of applying for a date for magistrates court civil appeals;

● Three terms from the moment of applying for a date for an opposed application;

● One to two terms from the moment of applying for a date for specially allocated applications;

● Three months from the moment of applying for a date on opposed motion matters;

● Two weeks from the moment of applying for a date for the special interlocutory roll;

● One week for the settlement court roll;

● For Road Accident Fund

PARTIES AND THEIR LEGAL PRACTITIONERS ARE NOT MAKING GENUINE EFFORTS TO SETTLE MATTERS

(RAF) default judgment applications, the lead time is two months from the moment the application is delivered;

● For RAF trials, it is three years from the moment of applying for a date;

● For other civil trials, the lead time is about 20 months from the day of applying for a date;

● For matters on the commercial trial roll, there are ad hoc set downs, but usually one term notice is required and, for civil trials that are longer than five days, the lead time is one to two terms Legal practitioners have a duty to assist the court in its efforts to reduce these lead times

BUSINESS LAW & TAX

Mozambique’s new labour law kicks in

• It is a welcome update and is intended to address key socioeconomic and technological changes

Alex Ferreira ENSafrica

Businesses that operate in Mozambique and employ individuals there have likely encountered the longstanding Labour Law, Act 23/2007, of August 1, which has been in operation since 2007

That act has finally been repealed and is replaced by the new Labour Law, Act 13/2023, of August 25, which came into operation on February 21

The new law is a welcome update to Mozambique’ s employment law framework and is expressly intended to address the significant socioeconomic and technological changes that have occurred in Mozambique and transformed the workplace over the past 16 years

The act covers concepts such as teleworking, temporary employment service (TES) arrangements, private employment agencies, pater-

nal leave and several others that firmly place Mozambican labour law on a contemporary 21st-century footing

WHO IS COVERED?

The act regulates both individual and collective labour relationships which have been defined fairly widely to encompass all subordinate

WORK MUST BE CONDUCTED WITH STRICT RESPECT TO AN EMPLOYEE’S RIGHTS AND FUNDAMENTAL GUARANTEES

work that is provided to another person or entity for remuneration Both Mozambican citizens and foreigners are covered by the new labour law “in all fields of activity” , as long as the activity takes place within the borders of Mozambique Article 2 expressly pro-

vides that the act will also regulate, “with the necessary adaptations” , associations, NGOs, international organisations, the co-operative/aid sector with regard to salaried employees working in that sector

It also covers diplomatic and consular missions where these hire local workers

These types of entities are quite prominent in Mozambique and should ensure that they are compliant with the new labour law

However, “functionaries and agents of the state” (such as civil servants) and employees of Mozambican state-owned entities, even those that have been “decentralised” or partially privatised, are expressly excluded from the scope of the new labour law

SPECIAL REGIMES

Certain types of workers will be governed by special sector-specific legislation and these include artists; professional sportsmen and women; domestic workers

KEEPING IT CURRENT

or those who work in the home; maritime and port workers; fishermen; rural workers; and those in the mining, petroleum and private security industries

All of these industries, as well as any other industry for which special legislation is enacted, will be subject to its own special legislation as well as the new labour law

The same conceptual approach is applied towards certain types of contracts or contractual arrangements (for example, they will be regulated by special or specific legislation but the new labour law will also apply)

These include retainer contracts, construction contracts, intermittent and seasonal work contracts, freelance work, telework and those who render their services via private employment agencies

There are important principles to keep in mind when applying the new labour law Article 5 sets out the most

CONSUMER BILLS

fundamental principles that infuse all Mozambican labour law and that should always be borne in mind whenever interpreting or seeking to apply any provision of the new act This is because if there is a contradiction between any provisions of the act or with any other statute that regulates labour relations, the interpretation that best conforms and gives expression to these guiding principles should always be favoured

PRINCIPLES

These fundamental principles are “the right to work” and the right not to be discriminated against, specifically based on colour, race, sex, ethnic origin, place of birth, religion, social position and political option This is a closed list of grounds and, interestingly, fails to mention other possible considerations for discrimination, such as pregnancy, marital status, sexual orientation or lan-

guage The third fundamental principle is the right to have stability of employment and to maintain one ’ s position at the workplace This right is obviously favourable towards employees and should be borne in mind whenever an employer contemplates dismissal or the amendment of an employee’ s terms and conditions of employment

This right is arguably balanced by the fourth fundamental principle, which is the recognition that there is a need for “the change of circumstances” at the workplace (for example, where an employer is required to effect redundancies or implement material changes to terms and conditions of employment in order to remain competitive)

Article 6 expands on what “the right to work” means in practice This is the idea that all citizens (it does not include foreigners) have the right to work in a job or profession that they have freely chosen, with equality of opportunities and without experiencing discrimination of any kind

Forced labour is, therefore, expressly prohibited, unless it takes place within the framework of penal legislation (such as prison labour)

Work must be conducted with strict respect to an employee’ s rights and fundamental guarantees, and employers must protect the health of their employees and ensure they work in safe and dignified conditions

All of the fundamental principles are of utmost importance, as the culpable violation of these principles will render the underlying legal act to be null and void, but without prejudice to the civil and criminal liability of the offender

There are many ways to enter into a contract

In a world of multiplying ways of communicating, new ways of entering into contracts attract widespread attention

But there have always been endless ways of entering into contracts which are binding unless the law or the parties restrict the method, for instance by requiring it to be in writing

The most recent example comes from Uganda where the court examined the question whether a WhatsApp exchange amounted to a contract and, if so, whether it was a written contract as required by Ugandan law

The court had no difficulty in finding that the words exchanged by the parties on WhatsApp amounted to a contract The contract was in writing because under Ugandan law a contract is in writing if it is in the form of a

data message

In SA a similar result was reached in 2014 where the appellate court found that an email exchange amounted to a contract The acceptance of an emailed offer by an email signed “Kind Regards Greg” concluded a signed agreement The signature was valid under the Electronic Communications Act because the contract was reduced to writing in the form of emails and signed electronically

The other interesting thing about this decision is that the parties had stipulated

that an amendment to their contract must be in writing and signed by the parties The emails were sufficient for that purpose A recent Canadian case found that a thumbs-up emoji meant that the person sending it was officially entering into a contract The judge called this a new reality in Canadian society Emojis may be new but the principle is not

There is no magic in a signature Sometimes an X will suffice Most signatures are illegible Millions of contracts are entered into by the click of a mouse or the conduct of the parties You can buy a loaf of bread instantly by placing the bread and money in front of the shopkeeper without saying a word A mere nod at an auction may be enough

Entering into a contract with a chatbot is possible

Currently the chatbot would be seen as the agency used by one party to create the transaction Things may change when generative AI does its own thing, but that is another debate

Thanks to an unfortunate Mr Bloom, everyone who studies contract law remembers that contracts are a matter of offer and acceptance When a Cape Town city jewellery store was robbed in 1913, the owner offered a £500 reward in a newspaper advertisement to anyone who gave information to the police which would lead to the arrest of the thieves and the recovery of the diamond jewellery, etc Mr Bloom gave information to the police which led to convictions and recovery of the jewellery

Unkindly, the jeweller successfully resisted Mr

Bloom s claim for £500 and succeeded on the basis that, when Mr Bloom provided the information that led to the recovery of the jewellery, he had not read the newspaper advertisement so he could not claim under any contract There was no offer and acceptance

Sometimes it works better in favour of the lucky party A man who won a piece of land in a competition defeated the defence that there was no written contract because that requirement only applies to the sale, exchange or

THERE IS NO MAGIC IN A SIGNATURE

SOMETIMES AN X WILL SUFFICE MOST SIGNATURES ARE ILLEGIBLE

donation of land but not to winning a competition He got his land

As long as a party has an intention to contract, expresses that intention in any one of a multitude of ways, and the other party accepts the offer (not necessarily in any formal exchange), you may have a binding contract

The Constitutional Court has upheld the Roman law principle that a contract seriously and deliberately entered into will be enforced by the courts The principles of how to contract have no limits except as the law or the parties themselves impose on them

We all have to be careful where we place our words, clicks, images or gestures

● Patrick Bracher (@PBracher1) is a director at Norton Rose Fulbright

Remote work raises law regime poser

• Labour regime ultimately not a function of geography but a question of jurisdiction

Jonathan Goldberg & Grant Wilkinson Global Business Solutions

According to WFH Research (2023), in 2019 an average of 7% of paid workdays were worked remotely This figure soared to 28% by September 2023 In that same year, a total of 13% of full-time employees were fully remote, 57% were full-time on-site and 30% were in a hybrid working arrangement Although fulltime employees numbered slightly more than remote/ hybrid employees, the difference is negligible

With the Covid-19 pandemic forcing companies to remote work to survive, employees had the freedom to work wherever they liked so long as they had a stable internet connection and a webcam And many took advantage of this, temporarily relocating to places that they had always wanted to visit

However, the question was if they were sitting on a beach in Portugal, working for their SA company, which labour law regime would govern them The Portuguese? Or still the South African?

In a published LLM thesis, titled The Territoriality of South Africa’ s Employment Legislation and the Jurisdiction of the Labour Court in Cross-Border Employment: A Comparative Analysis, Rinaldi (2021) makes the point that the manner in which cross-border employment relationships are conducted is incongruent with the dynamic way in which the nature of work is rapidly evolving Ultimately, how these relationships are handled depends on the spatial scope of SA s employment laws

In other words, the handling of employment relationships, including the rights and obligations of employers and employees, is not determined by the geographical boundaries defined in South African employment laws The jurisdictional reach of South African labour laws dictates how employment relationships are regulated

and governed

In addition, when dealing with matters such as this are the principles of private international law which would include, among others, the location of parties and the currency the employee is paid in

WHAT PRECEDENT HAS BEEN SET DOWN?

In Parry v Astral Operations Ltd (LC190/04, C190/04) [2005] ZALC 15; [2005] 10 BLLR 989 (LC); [2005] JOL

MANY TOOK ADVANTAGE OF THIS, TEMPORARILY RELOCATING TO PLACES THAT THEY HAD ALWAYS WANTED TO VISIT

14962 (LC); (2005) 26 ILJ 1479 (LC) (June 21 2005), a former employee (the respondent) sued their previous employer (the appellant) in the labour court (LC), claiming various amounts of money owing to him after his employment had ended The employer also filed a counterclaim but later withdrew it

The employee’ s claims were categorised into four:

Claim A: The employee said he had been unfairly dis-

missed without the proper procedures being followed He sought payment in the amount of R530,131 31 alleging breach of contract

Claim B: The employee sought payment for the following: salary, notice pay, leave pay, relocation allowance and severance pay for specific periods The employee claimed payment of these amounts under section 77(3) of the Basic Conditions of Employment Act (BCEA)

Claim C: The employee sought compensation equivalent to 12 months’ pay for unfair dismissal under the Labour Relations Act (LRA)

Claim D: This was an alternative claim to the claim under C, based on an alleged violation of fair labour practices according to the Constitution

In deciding the matter, the court had to decide what the appropriate jurisdiction is The court went into a lengthy exposition of the law and concluded that: “Applying the ‘officious bystander’ test there can be no doubt that the only law applicable to the employment relationship in the minds of the parties at the time of contracting was South African ”

The court went further to indicate “If I am wrong in finding that the parties tacitly or impliedly exercised a

ROOM WITH A VIEW

choice of law, then the same factors that I have identified as indicators of an implied choice of law are also strong factors connecting the contract, the disputes, the parties and their rights to SA”

The court concluded that the applicable law is South African and ordered the employer to pay the employee amounts in line with the claims brought

After this the appellant made an application to the LC for leave to appeal to this court against some of the orders The court granted leave to appeal against some of its orders and refused leave in respect of others The respondent also sought leave to cross-appeal and leave was granted

The employer argued that the LC did not have jurisdiction over the case because the location in which the employee was carrying out his duties was not in SA (his work location was in Malawi) and therefore the LRA and Basic Conditions of Employment Act (BCEA) did not apply The employee disagreed, saying that these laws did apply and the LC had

jurisdiction

The matter was appealed to the Labour Appeal Court (LAC)

Counsel for the appellant submitted that the LC had no jurisdiction In support of this he referred to the presumption in SA law that “(i)n the absence of an intention clearly expressed or to be inferred either from its language or from the object, subject-matter or history of the enact-

THIS CASE CLEARLY ILLUSTRATES THE INTRICACIES ONE FACES WHEN HAVING MULTIJURISDICTIONAL BUSINESSES

ment Parliament does not design its statutes to operate on its subjects beyond the territorial limits” of the country In support hereof he referred to Maxwell: “Interpretation of Statutes” , 8th ed at p127 as approved in Bishop and others v Contrath & Another 1947(2) SA 800 (T) at 804

The LAC in Astral Operations Ltd v Parry (CA 8/05) [2008] ZALAC 29; (2008) 29 ILJ 2668 (LAC) (September 4 2008), found that parties are able to choose whatever law as the law that must be applied in resolving a dispute between themselves arising out of some agreement between them That law may be invoked by a court in a foreign jurisdiction to adjudicate a dispute In this case a Malawian court could have applied South African law including the BCEA and the act in adjudicating the respondent s claims against the appellant

This being said, the court also found that some of the respondent s claims were based on the contract of employment and not on the BCEA or the act This would give rise to the argument that,

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based on the provisions of sec 77(3) of the BCEA, the LC has the same jurisdiction as the high court in respect of any matter concerning a contract of employment and that, even if the BCEA and the act did not apply, the LC would have jurisdiction to deal with such claims in the same way as the high court would have had jurisdiction

The LAC said that whether South African labour laws apply to a case depends on whether the employer’ s business at which the employee works is in SA or not Even if an employer has operations both inside and outside SA, what matters is where the specific part of the business the employee works for is located If it is in SA, then South African labour laws apply If it is not, then South African labour laws do not apply

The final ruling handed down by the LAC was as follows:

● The appeal was upheld,

● The cross-appeal was dismissed;

● There was to be no order as to costs on appeal and cross-appeal “(a) The LAC concluded it had no jurisdiction to entertain the applicant s claims and there was no order of costs

This case clearly illustrates the intricacies one faces when having multijurisdictional businesses and/or services rendered across different jurisdictions

Principles of private international law must be taken into account in assessing which law is of application and locality often proves to be the factor that sways the courts

LAW & TAX

Managing annual leave is key

• It is positive for staff wellbeing and a good business practice

Johan Botes

Baker McKenzie

As the year kicks into full swing and employees begin to dream of vacations ahead, employers know that managing annual leave is a business imperative

Various studies have shown that taking time off from work is essential for managing stress, improving wellbeing and increasing productivity In addition to the positive impact on staff and the business, managing annual leave is also essential for financial hygiene

Allowing staff to accumulate annual leave by not taking it regularly not only deprives the employees and the business of the benefit of rested, rejuvenated and productive employees but also creates a financial liability

At termination of employment (for any reason), employees are entitled to payment of their statutory annual leave not taken during the current annual leave cycle They are also entitled to be paid for annual leave carried over into the next

annual leave cycle if their employment terminates during the first six months of that following annual leave cycle

In some instances, employment contracts or annual leave policies even entitle employees to payment of nonstatutory accumulated leave (leave granted in excess of the 21 calendar days of statutory annual leave)

This leave liability can run into significant sums that sit on a balance sheet as a business liability, and most employers ensure their leave policies do not require them to pay staff for nonstatutory annual leave not taken by the time of termination of employment

The best practice is for businesses to actively manage their staff’ s annual leave Teams should plan annual leave to be taken during the

THE LAW DOES NOT ENVISAGE THAT STAFF WILL NOT TAKE STATUTORY ANNUAL LEAVE DURING THE ANNUAL LEAVE CYCLE

COUNTING DOWN THE DAYS

year and align on who takes leave at which stage to ensure the needs of the business are met

Where annual leave is not actively managed, one typical outcome is that a large group of employees belatedly seek to take annual leave at the same time (generally at the end of the year)

Employers need not grant annual leave merely because the employee seeks to take it at a specific period The law proposes that parties agree to the time during which annual leave may be taken Absent such agreement, the employer may dictate when employ-

ees may take annual leave

Directing staff when to take leave or declining annual leave requests en masse is hardly likely to create a stimulating and conducive employee relations climate, so taking steps to manage this throughout the year is certainly best The law does not envisage that staff will not take statutory annual leave during the annual leave cycle, save for the exception created that allows such statutory annual leave to be taken during the following six months at the end of the current annual leave cycle

The statute does not make

TAXING MATTERS

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provision for such annual leave to be forfeited or carried over (for longer than six months), so the employer has to ensure employees take at least 21 calendar days of statutory annual leave every annual leave cycle (or within the following six months)

The employer may not pay the employee instead of taking such statutory annual leave Payment of untaken statutory annual leave is only permitted at termination of employment, with the understanding that all annual leave older than 18 months would have been taken Employers may not force

or allow staff to take annual leave during their notice period But employers seeking to reduce the quantum of any annual leave payment to employees could require staff to take all their statutory annual leave prior to the commencement of the employee’ s notice period As the employer may unilaterally determine when employees may take their annual leave, such a policy is enforceable In practice, employees will hardly ever give more notice than required by law or contract An employee resigning (or terminated by the employer) will thus be able to demand payment of annual leave accrued during the current annual leave cycle (or transferred to the next cycle if the termination is within the first six months of the new cycle), which the employee had not yet taken as of the start of their notice period The employee can refuse to take or be placed on annual leave during their notice period

Taking leave, and ensuring your staff take their leave whether they want to or not, should be a critical people practice in any world-class organisation Such a practice is essential to creating a culture of where employees are able to thrive and perform at their best

Foreign e-service sellers could be liable for tax

The concept of “electronic or digital commerce ” has often been referred to over the past years

It typically involves a supplier who provides its products electronically via the internet, such as software packages, applications, streaming services and so on

Several countries (including SA) have implemented measures by which the relevant tax authority may tax the suppliers of these services in the main through ValueAdded Tax (VAT) or Goods and Services Tax (GST) The supplier usually has no operations, physical presence or activities in the recipient s country

Notwithstanding this fact, the foreign supplier might be required to register for VAT and/or income tax purposes This article briefly discusses the relevant tax considerations of a foreign supplier of electronic services (e-services) from a South African perspective

VAT CONSIDERATIONS

Since 2014 SA has implemented a specific VAT regime for nonresident suppliers of electronic services Electronic services mean “ any services supplied by means of an electronic agent, electronic communication or the internet for any consideration

A nonresident providing electronic services is deemed to carry on an enterprise in SA if at least two of the following three requirements are met:

● The recipient of the services is a South African resident;

● Any payment for those services originates from a South African bank; and

● The recipient of the services has a business address, residential address, or postal address in SA

If an enterprise is carried on, then the nonresident will only need to register for VAT in SA if the value of its supplies exceeds R1m in a continuous 12-month period

Practically, if a

nonresident is required to register for VAT as an electronic service provider, Sars will require the nonresident to register as an “external profit company, ” in other words a branch Once registered, the nonresident is obligated to charge VAT at the standard rate on the supply of electronic services to South African recipients

The registration of a branch for VAT purposes poses the question of whether this branch could result in any income tax implications from a South African perspective for the nonresident Furthermore, would the supply of electronic services be subject to income tax in SA?

INCOME TAX CONSIDERATIONS

From an income tax perspective, a branch of a nonresident will generally be subject to South African normal tax if the income is attributable to a permanent establishment in SA A permanent establishment is a complex term, also usually

regulated by the relevant double tax treaty (if applicable), but generally means a fixed place of business through which the business of an enterprise is carried on This is a factual question that considers where the activities of the enterprise are conducted and the physical presence in SA

Although VAT registration may be a factor, it does not automatically mean that a permanent establishment is present A double tax treaty is an agreement between SA and the relevant foreign country of which the supplier will be a resident

The agreement typically determines each jurisdiction s taxing rights with respect to amounts received by or accrued to

REGISTERING FOR VAT DOES NOT AUTOMATICALLY MEAN AN ENTITY IS ALSO SUBJECT TO INCOME TAX

residents of those countries from sources in either of the states

If a permanent establishment is present, SA (as the “ source ” country) will be entitled to levy tax on income attributable to the permanent establishment (taking into account any expenditure attributable to the permanent establishment) Determining whether (i) a permanent establishment is present and (ii) what income (and expenses) are attributable to that permanent establishment requires a complex factual analysis This is, however, a crucial analysis as it determines taxing rights

When applying these principles to electronic or digital commerce, it is unlikely, notwithstanding the VAT registration, that a foreign supplier of purely electronic or digital commerce will have sufficient physical presence in SA to establish a permanent establishment However, it remains a

question of fact as a foreign supplier with South African offices, employees, and support staff may very well tip the scales in favour of a permanent establishment

To conclude, registering for VAT does not automatically mean an entity is also subject to income tax And conversely, not being subject to income tax does not mean that no VAT obligations arise

Where a foreign supplier is conducting any business, whether electronic or digital commerce or otherwise, in SA, the tax implications are complex and, therefore, obtaining tax advice is essential in ensuring one does not fall foul of any South African tax legislation From the South African recipient of foreign services perspective, informing the foreign supplier of potential tax implications is advisable

● Estian Haupt is Associate

Director: SA Direct Tax and Leonard Willemse Associate

Director: SA Indirect Tax at

Specialist

Realising ICT reseller value requires care

• Due diligence, attention to agreements vital to avoid possible pitfalls of cutting out the OEM

Priyanka Naidoo ENSafrica

In the rapidly evolving landscape of the Information and Communications Technology (ICT) industry, businesses are constantly seeking efficient and cost-effective solutions to meet their technological needs

One avenue many companies explore is engaging with ICT product resellers While these resellers can offer benefits, such as great commercials and access to a wide range of products, it is crucial for companies to be aware of the potential risks and rewards associated with this type of engagement

One of the primary risks when dealing with ICT product resellers is the potential compromise in product quality and authenticity Some resellers may source products from unauthorised channels, leading to the distribution of counterfeit or substandard goods This not only poses a threat to the efficiency and reliability of ICT infrastructure but also exposes the company to the risk of no manufacturer warranties on the products, bad or lack of after-sales support, third-party IP claims and security vulnerabilities

However, although the above risks are present, reputable resellers often serve as

gatekeepers for high-quality products Many resellers work closely with original equipment manufacturers (OEMs) and are authorised to distribute their products By carefully choosing a trusted reseller, businesses can gain access to genuine, reliable ICT products that meet their specific needs

To mitigate risks, businesses should conduct a thorough vetting of resellers during the quotation or bidding process, ensuring that they are authorised by the OEM to resell their products Requesting certifications and warranties for the products being purchased can provide an added layer of assurance

BEWARE HIDDEN COSTS

Engaging with ICT product resellers can provide significant cost savings compared with purchasing directly from OEMs Resellers often negotiate bulk deals, passing on the discounts to their clients Additionally, resellers may offer flexible payment terms and financing options,

DEALING WITH A RESELLER RATHER THAN DIRECTLY WITH THE OEM CAN SOMETIMES RESULT IN A LACK OF ACCOUNTABILITY

allowing businesses to better manage their budgets However, some resellers present seemingly attractive deals upfront, only to include hidden costs later in the transaction process These hidden costs could include shipping fees, licensing fees, or additional charges for support and maintenance

To reduce the risk of hidden costs, companies should engage in transparent negotiations and clearly define the terms of the agreement, including all associated costs This proactive approach can help businesses capitalise on cost savings while minimising the risk of unexpected financial implications

OEM TERMS

An overlooked risk commonly associated with reseller engagements is the possibility of hidden terms within the OEM’ s end-user licence agreements (Eulas) Eulas are legal agreements that outline the terms and conditions under which the end user can use the software or hardware The OEM’ s Eula is often incorporated by reference into the reseller agreement (see our point below on hyperlinked terms) While Eulas are standard in the software industry, the complexity and potential impact of these agreements can introduce risks when engaging with resellers

TRACK RECORD

Businesses may find themselves subject to specific terms, restrictions or licensing conditions outlined by the OEM, which are not always transparent during the procurement process Terms that sometimes raise compliance issues include:

● Restrictions on the number of users;

● Geographic locations, or the transferability of licences;

● Clauses that trigger additional costs based on factors such as usage metrics; and

● Growth in the number of users, or changes in the organisation's structure

Unlike dealing directly with the OEM, where businesses may have some leverage to negotiate terms or seek modifications to the Eula, engaging with a reseller can limit the business’ s negotiation power Resellers typically act as intermediaries and may not have the authority to alter or negotiate the terms set by the OEM

To mitigate this risk, businesses should proactively seek transparency regarding the OEM’ s Eulas from the reseller prior to finalising any agreement Additionally, efforts should be made to negotiate directly with the OEM whenever possible, ensuring that the organisation has a clear understanding of and can comply with all terms associated with the

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purchased ICT products

HYPERLINKED TERMS

A noteworthy risk arises from hyperlinked terms within reseller agreements

Customers often neglect to click on these hyperlinks, potentially missing crucial information regarding obligations, compliance requirements, or unexpected conditions

Businesses should ensure a meticulous examination of hyperlinked terms to mitigate the risk of inadvertently agreeing to terms that could affect the business negatively

EXPERTISE VS ACCOUNTABILITY

Resellers are often experts in their field, possessing indepth knowledge of various ICT products and solutions

Businesses can leverage such expertise to receive tailored recommendations based on their specific requirements

Resellers can assist in identifying the most suitable products, configurations, and technologies to optimise the organisation’ s ICT infrastructure

However, dealing with a reseller rather than directly with the OEM can sometimes result in a lack of accountability If issues arise with the purchased products, the reseller may not have the same level of responsibility

or capability to address and resolve problems as the OEM would This can lead to delays in support, troubleshooting, and issue resolution, affecting the company ’ s operations

Another related risk is ensuring that the OEM’ s contractual terms are “passed through” , where appropriate

“Passing through” refers to the process of flowing certain contractual terms down to the customer, such as service level agreements (SLAs), support policies and warranty terms Essentially, it involves ensuring that the commitments and guarantees made by the OEM are effectively conveyed to the customer through the reseller

Businesses should carefully review the reseller’ s SLAs and support and warranty policies to confirm that the terms and conditions promised by the OEM are clearly articulated in the reseller’ s agreements with the customer It is advisable to choose resellers with a proven track record of customer support and those who are committed to facilitating communication between the customer and the OEM when necessary

PRACTICAL TIPS

● VET potential resellers thoroughly to ensure they are authorised by the OEM to resell their products;

● ENGAGE in transparent negotiations and clearly define the terms of the agreement, including all associated costs;

● REQUEST the OEM’ s Eulas or other relevant terms or policies from the reseller prior to finalising any agreement;

● CONSIDER the option of negotiating with the OEM directly; and

● REVIEW hyperlinked terms, and the reseller's SLAs and support and warranty policies

● Reviewed by Wilmari Strachan, Executive, Technology, Media and Telecommunications at ENSafrica

New bill gives more time for two-pot system rollout

Joon Chong & Nicolette van Vuuren

Webber Wentzel

On February 21 2024, the National Treasury released the Second Amendment Bill to make technical corrections to the Revenue Laws Amendment Bill (RLAB)

The Second Amendment Bill follows the proposal by finance minister Enoch Godongwana, that parliament extend the date of implementation for the twopot system contained in the RLAB from March 1 2024 to September 1 2024 for various reasons supported by indus-

try stakeholders

The bill eliminates the necessity for a tax directive when transferring the seeding amount from the vested to the savings components contemplated in the two-pot system

The proposed amendments to the definitions of the three components exclude maintenance awards This adjustment ensures consistency with existing tax provisions regarding the tax treatment of maintenance awards under section 7(11) of the Income Tax Act 58 of 1962

Furthermore, the bill addresses intra-fund trans-

fers and associated tax directives by proposing that the reallocations of amounts between the three components are not treated as transfers for which tax directives are required Consequently, the requirement to obtain a directive for reallocations between the three components has been withdrawn in the Second Amendment Bill

While these proposed changes are a step in the right direction to give effect to the two-pot system, the lead time provided still falls short of what industry stakeholders advocate for to overcome the

practical challenges associated with the new system, including how it will be implemented for defined benefit funds (DB funds)

A major difference between defined contribution funds (DC funds) and DB funds is that in DC funds, it is possible to calculate the value of the contributions that the member has already made, but in DB funds, the final pension fund benefit will be based on the final salary of the member plus the number of years service

The RLAB has provided for the one-third and twothirds allocations to the sav-

ings and retirement components of DB funds to be determined regarding a member s pensionable service on or after September 12 2024, or a reasonable method of allocation as approved by the Financial Sector Conduct Authority (FSCA)

The implementation of the two-pot system for DB funds must be carefully undertaken to ensure fairness to all members of each DB fund

Any necessary engagements with the FSCA by DB fund administrators will also require additional lead time from the promulgation date to the implementation date which the Second Amendment Bill does not provide

The Second Amendment Bill aims to clarify the language in the RLAB and simplify the directives system for both administrators and the South African Revenue Service, allowing for an efficient implementation of the twopot system The deadline for public comment on the Second Amendment Bill is March 31 2024

LAW & TAX

Adding offshore wind to mix

• SA should act now to harness its long-term energy potential

Alessandra Pardini & Gillian Niven Allen & Overy

SA has immense potential to harness energy from offshore wind The World Bank estimates it could produce up to 901GW of power from both floating and fixed seabedmounted offshore wind, mostly in high-potential Western Cape areas such as Saldanha, Cape Town, Hermanus and Mossel Bay

This could help diversify SA’ s energy mix away from coal, alleviate load-shedding and grid constraints, and boost energy security in Africa’ s most industrialised country

The World Bank says floating turbines could produce up to 852GW of SA’ s 901GW of potential wind power, while fixed offshore wind infrastructure could produce 49GW It says the country needs to implement six solutions to overcome legal and environmental hurdles and kickstart its offshore wind industry

SA must investigate the best floating turbine infrastructure for the local coastline Floating turbine technology is still in its infancy, with only a handful of pilot projects in operation across the world

SA has a relatively deep coastline and some of the strongest ocean currents in the world, which pose technical challenges for these projects as floating turbines require infrastructure including floating substations, ports large enough to handle the huge turbines, as well as greater use of deep-sea cabling

All this is expensive and complex, which is why we need the best minds on the job to solve the technical challenges associated with these explorations

Regulatory hurdles can be overcome with help from the oil and gas sector Offshore wind projects may be relatively common in Europe and China, but they are still novel in SA This means first movers will need to navigate complex regulations and bureaucratic regulators to get projects off the ground

This will include obtaining marine lease permits through the Integrated Coastal Management Act, dealing with civil aviation concerns, as well as taking account of marine special planning considerations The good news is that all of this is not without precedent

Developers can leverage considerable experience from SA’ s offshore oil and gas sector, as well as companies that have been involved in large undersea cabling and green hydrogen projects, to give them advice on how to structure project companies, reduce risk and tackle regulation SA should start collecting high-quality environmental impact and other data

The construction of fixed off-

THE WORLD BANK SAYS FLOATING TURBINES COULD PRODUCE UP TO 852GW OF SA’S 901GW OF POTENTIAL WIND POWER

POWER GENERATION IS A BREEZE

shore wind projects typically costs at least double the price of onshore wind projects, and floating turbine projects cost even more Offshore turbines can, however, yield greater results because the larger blades have higher generating capacity

Given the challenges of SA’ s coastline, collecting good-quality data on seismic conditions, wind and wave speeds will be crucial in deciding which offshore projects are financially and technically viable To determine this viability, developers will also need to collect a wide array of long-term environmental and socioeconomic information to submit environmental impact assessments to the regulators who sign off on such projects

It is not uncommon for these assessments to take up to three years to produce If we want the industry to take off in the next decade, South Africa needs to start conducting these studies now Set aside the funds for exploration it’s worth it

We believe it is worth investing considerable resources in the necessary data-gathering exercise for offshore wind viability in SA, despite the high costs involved

International investors who may provide project financing are often worried about the environmental, social and governance impacts of offshore projects, so high-quality impact assessments that adhere to globally recognised best practices can go some way to alleviating these concerns and securing investment

The government must determine if it will buy the energy or if someone else should

A big unknown is still who the power offtaker for these projects will be The most obvious solution would be for the SA government to purchase the power and feed it directly into the national grid Unfortunately, the current integrated resource plan (IRP) for new generation capacity does not recognise procurement from offshore wind

The department of mineral resources and energy’ s much-anticipated and delayed IRP 2023 may change this, but developers are not holding their breath

The government urgently needs to provide clarity on whether it would buy in offshore wind power but so should private sector players such as green hydrogen, green ammonia and sustain-

THE GOVERNMENT URGENTLY NEEDS TO PROVIDE CLARITY ON WHETHER IT WOULD BUY IN OFFSHORE WIND POWER

able aviation fuel producers

Engagement with stakeholders will be needed at every stage

Last year s decision by a South African court to halt Shell s exploration of the Wild Coast still looms large in the

public consciousness The court sided with residents who said they had not been properly consulted about Shell’ s exploration of the seabed, with many concerned about the harmful impact on marine life Developers will need to thoroughly engage with various groups, including indigenous peoples and small-scale fisheries, to address concerns that offshore wind can be built without causing significant harm to the environment and local industries

Offshore wind can diversify SA’s energy mix but is not a silver bullet While there is considerable opportunity for offshore wind in SA, the technology would not be a quick fix or silver bullet for the country s energy crisis

Over the longer term, offshore wind has the potential to be a highly useful tool to further diversify SA s energy mix and boost the economy so we need to see it as part of a broader energy transition and play the long game

AI machine is not an inventor, says UK court

Ramon Pereira Adams & Adams

The Supreme Court of the UK handed down its judgment on whether a machine (Dabus) powered by artificial intelligence (AI) may be an inventor in terms of the UK Patents Act

The court was asked to consider two patent applications filed by Stephen Thaler, who says the inventions were created autonomously by Dabus and he, as the owner of the machine, is also the owner of the invention

This was rejected by the British comptroller-general of patents, designs and trademarks, whose decision was then further appealed in two

lower courts, finally ending at the Supreme Court

In reaching its decision, the Supreme Court relied on two substantive points First, it considered the scope and meaning of an inventor in terms of the UK Patents Act and determined that an inventor must be a natural person Second, the court considered whether Thaler was nonetheless entitled to be an applicant if the inventor could not be an AI-powered machine Thaler argued that as the owner and controller of the AI machine, he was entitled to the fruits produced by Dabus, so he derived the rights to the invention

through the doctrine of accession, usually reserved for tangible property

The court summarily dismissed the argument and found no basis to extend the doctrine to intangible property, highlighting that a patent is applied for and obtained for the technical advancement made by an inventor, not the tangible property created through that advancement, per se

This follows on the heels of similar judgments in other jurisdictions, including, more recently, the US Court of Appeals for the Federal Circuit Thaler had a glimmer of hope when an Australian lower court agreed with his

submission, but this was later overturned on appeal to a higher court

Interestingly, SA has already granted a patent where Thaler was successful in naming Dabus as the inventor Though this received much publicity, it is important to be aware that the SA Patent Office does not conduct substantive examination Therefore, the issue of inventorship would only be decided should an application for revocation be brought against the patent on the grounds the patentee was not a person entitled to apply

A person entitled to apply is an inventor or the person acquiring the right from the

inventor, or both such inventor and other person We have briefly considered the likelihood that the meaning of inventor would be restricted to a natural person in terms of the SA Patents Act

In conclusion, it is worth noting that the Lords empha-

A PERSON ENTITLED TO APPLY IS AN INVENTOR OR THE PERSON ACQUIRING THE RIGHT FROM THE INVENTOR, OR BOTH SUCH INVENTOR AND OTHER PERSON

sised that the appeal was not concerned with the broader question of whether technical advances generated by AIpowered machines acting autonomously should be patentable

Nor was it concerned with whether the meaning of the term inventor ought to be expanded to include AI-powered machines which generate new and non-obvious products and processes which may be thought to offer benefits over products and processes which are already known

These questions raise policy issues about the purpose of a patent system, which no doubt will be considered

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BUSINESS LAW & TAX

Sasfin case: beware dragons

• Sars in uncharted waters with its damages claim for tax allegedly owed by former clients

At time of going

the

for

SA Revenue Service, (Sars) Edward Kieswetter, confirmed that Sars had instituted legal proceedings against Sasfin Bank Sars says it conducted a

investigation into various SA

who had not made true and accurate tax disclosures to Sars The investigation revealed, it says, that the taxpayers colluded to move funds offshore in a manner that obscured tracing the expatriated payments and jeopardises the recovery of tax in SA

The commissioner’ s posi-

tion was that it is inappropriate to comment on the question of liability and compensation for the loss to the fiscus, as these are legal issues that are now before the judicial system Given this development, Sars will not be making any further comment Sasfin Holdings, in turn, said Sasfin Bank has received a civil summons for a total amount of R4 87bn plus interest and costs in the form of a damages claim instituted by Sars This summons relates to Sars’ purported inability to collect income tax, VAT and penalties allegedly owed by former foreign exchange clients of the bank

There is little doubt this will be an interesting legal battle likely to play out over a few years as this type of

BATTLE IN THE MAKING

claim is quite unprecedented in SA law

In fact, a legal opinion from ENS, authored by Prof Dale Hutchinson, Prof Michael Katz and Aslam Moosajee, and endorsed by Advocate Wim Trengove SC, is unequivocal that the claim

falls outside the recognised parameters of applicable law and has a very remote likelihood of success

Sars’ claim relates to the expatriation of money going back to 2014, in which a criminal syndicate colluded with former employees of

VIEWPOINT AFRICA

/FREDDY MAVUNDA

Sasfin Bank who were operating outside their scope and authority of employment

The legal question of wrongfulness is front and centre in the case, which is based on damages rather on a direct tax claim against Sasfin Under SA’ s law of

delict or civil wrong that causes harm to another person or entity there are two types of claims: one for bodily injury or damage to property, and one for pure economic claim For pure economic loss claims, however, courts are generally reluctant to impose liability unless there is a recognised category that the court has already established

Either way this case is unprecedented in SA

Sars may find it will be tough getting over the wrongfulness hurdle for example, claiming a bank should be held liable because its negligence has caused economic loss

There is also a real risk that should such a claim succeed, it could open the floodgates and lead to indeterminate liability a chilling consequence for the financial sector as a whole should other businesses ever face similar claims

Beneficial ownership data not available to public

Mahesh Acharya &

Duane Wekesa ENSafrica

Kenya ’ s Statute Law (Miscellaneous Amendments) Act, 2019, made amendments to the Companies Act, 2015, by introducing Section 93A which requires every company registered in Kenya to keep a register of its beneficial owners and file a copy with the Registrar of Companies within 30 days of its preparation or within 14 days after an amendment

A company ’ s register of beneficial ownership information (BO Information) discloses the personal information of the beneficial owners of a company, the nature of ownership or control they have, and the date they became or ceased to become beneficial owners

To operationalise this requirement, the attorneygeneral published the Companies (Beneficial Ownership Information) Regulations on February 18 2020, which gave guidelines on, among others, who qualifies as a beneficial owner, the contents of the beneficial ownership register, the filing requirements with the registrar and the restriction on disclosure of information contained in the beneficial owners register

A beneficial owner of a private company is a natural person who meets any of the

following conditions whether individually or jointly in relation to the company:

● Holds at least 10% of the issued shares in a company either directly or indirectly;

● Exercises at least 10% of the voting rights in a company either directly or indirectly;

● Holds a right, directly or indirectly, to appoint or remove a majority of the members of the board of directors; or

● Exercises significant influence or significance control; directly or indirectly, over the company This includes the person(s) responsible for making strategic decisions that ultimately affect the business or determine the itinerary of the legal person

On February 24 2022 the attorney-general published the Companies (Beneficial Ownership Information) (Amendment) Regulations, 2022 which aimed to make the public procurement process transparent as well as enable the government to publish important information about a company in matters of public interest and to streamline some

regulations to give better effect to the act

More recently, the attorney-general published the Companies (Beneficial Ownership Information) (Amendment) Regulations, 2023 (new amendment regulations) which are aimed at aligning the disclosure of beneficial ownership information with the Financial Action Task Force (FATF) standards and to provide for the protection of personal data in accordance with the Data Protection Act,

2019 The new amendment regulations provide that a company can disclose beneficial ownership information in the following circumstances:

● For communicating with the beneficial owner concerned;

● For compliance with the proceeds of in order to comply with the Proceeds of Crime and Anti-Money Laundering Act, 2009, and its regulations;

● For compliance with the Prevention of Terrorism Act, 2012, and its regulations;

● For compliance with a court order;

● On written consent of the beneficial owner;

● To a procuring entity authority where the company participates in public procurement and assets disposals;

● To a contracting authority where the company participates in a public-

private partnership; and

● To financial institutions such as banks for the purposes of entering into a relationship with the institution

Disclosure of beneficial ownership by the registrar, on the other hand, is limited to the following entities on written request:

● To a competent authority;

● The Public Procurement Regulatory Authority;

● The Public Private Partnerships Committee;

● Supervisors or regulators of financial institutions such as the Central Bank of Kenya and designated nonfinancial businesses and professionals; and

● Any government agency in charge of implementing anti-money laundering and countering financing of terrorism measures such as the Financial Reporting Centre

These entities will be required to submit a written beneficial ownership search request at a fee of KES 600 (about $4) The information contained in the search report is only to be used for the purposes of customer due diligence and shall not be disclosed to third parties unless permitted by law

The new amendment regulations prohibit the publication of BO Information to the public and make an exception to its publication by the Public Procurement Regulatory Authority in the government

portal in relation to entities that have been awarded a tender by the procuring entity as part of a contract award or by the government where the matter is of public interest

The implementation of a central public registry of beneficial information raises concerns about the safety of personal data such as the misuse of personal information by third parties

The Amendment Regulation partly addresses this concern by providing that the publication or disclosure of BO Information shall not include protected personally identifiable information except where the disclosure is made to a competent authority or pursuant to a court order

Kenya s position on public access to BO Information bears the hallmarks of the decision of the Court of Justice of the European Union (CJEU) in Joined Cases C-37/20 and C-601/20 In its judgment, the CJEU held that general public access to beneficial ownership registers is unlawful as it violates the fundamental rights to privacy and protection of personal data

Furthermore, it held that access to BO Information by financial institutions and competent authorities is necessary and appropriate for achieving the public interest of preventing money laundering and terrorist financing

Notably, the European parliament extended this access to persons with legitimate interests such as media, civil society and higher education institutions for a period of two-and-ahalf years, which can be renewed, suspended or revoked

SA also limits public access to BO Information and only allows access to law enforcement and competent authorities In contrast, beneficial ownership information is publicly available in the UK unless the exception for disproportionate risk to the beneficial owner is invoked

Given that the disclosure of BO Information to competent authorities or pursuant to a court order will include disclosure of protected personally identifiable data, significant data security challenges are raised The use of technology such as blockchain to manage beneficial ownership records may prove vital

● Mahesh Acharya is a partner & Duane Wekesa a junior associate for ENSafrica in Kenya

JET must not repeat past mistakes

• A truly just transition requires continuous planning and inclusive engagement with all stakeholders

Bruce Dickinson, Garyn Rapson & Dalit Anstey Webber Wentzel

The move away from fossil fuels towards clean energy sources was described by the International Energy Agency as “unstoppable” in its latest edition of the World Energy Outlook

At COP28 in December 2023, governments from across the world called for the tripling of renewable energy capacity globally They also called for a transition away from fossil fuels in energy systems in a just, orderly and equitable manner, accelerating action in this critical decade to achieve net zero by 2050, in keeping with the science

These statements send a clear message regarding the world’ s energy trajectory

SA is in the process of charting the course for its own energy transition Dominated by coal, the country’ s entire energy value chain, including mining, infrastructure, transport, products and livelihoods, is at risk

Understandably, there is a call by some developing countries, including SA, for the energy transition to be underpinned by considerations of justice (procedural, distributive and restorative justice), hence the emergence of the term just energy transition (JET)

Lessons from previous experiences where commodities were abandoned for

environmental, social and health reasons should be learnt For example, when asbestos was declared an undesirable commodity that was banned in many parts of the world, host countries whose economies depended on asbestos mining were the ones who carried the costs We must ensure history does not repeat itself concerning coal, particularly because of the scale of the transition required in the present circumstances

MINING COMPANIES ARE LEGALLY REQUIRED TO PLAN FOR SUSTAINABLE MINE CLOSURE THROUGHOUT THE LIFE OF MINE

The context and commer cial realities of the mining industry in SA cannot be ignored

The mining industry has faced significant challenges over the past 20 years, including regulatory inconsistencies and an increasingly complex social landscape This is exacerbated by failing energy, infrastructure, logistics and weakened local government

The result has seen limited investment into the industry and large-scale divestment by the majors of operations to mid-tier and smaller miners Junior miners do not necessarily have the depth of

skills nor the balance sheet to pursue JET initiatives, which could make the development of circular and/or post-mining economies difficult to get off the ground

Absent the introduction of a competitive and reformed mining and tax regime, this cycle will likely continue, and any form of meaningful JET will continue to elude the country, particularly the most vulnerable the host communities The net result is likely to play out as superficially rehabilitated mines (if at all) no post-mine economy to speak of, and taxpayers burdened with resolving both issues

There is misalignment and mistrust regarding the JET among some of the key stakeholders, namely mining companies, the government (across all levels and departments), labour unions, host communities and Eskom The lack of precedent also exacerbates the misalignment

A November 2023 report by the Presidential Climate Commission regarding Komati power station’ s decommissioning and repurposing project provides some important lessons and recommendations for the JET, especially concerning procedural justice and community engagement

Komati was closed for economic reasons associated with its age (not the country s decarbonisation agenda) and the JET aspects were an afterthought The key message is, therefore, that the JET requires continuous planning

TIME TO CLEAN UP ITS ACT

throughout a project’ s life cycle and inclusive and participatory engagements with all stakeholders, including affected communities

To avoid these risks materialising for the JET, key stakeholders, including mining companies, labour unions, host communities and government (at all levels and in all departments) must collaborate, and play their respective parts in building effective and constructive partnerships for post-mine closure

Mining companies are legally required to plan for sustainable mine closure (which includes financial, environmental and social components) throughout the life of mine

Proposed amendments to the regulations relating to financial provisioning for mine closure (which have not yet been finalised) clarify that the objective of mine closure is to achieve an agreed sustainable end state, which must be informed by regular consultation with the government and other stakeholders, including communities on closure objectives throughout the project s life cycle

It is therefore not acceptable to delay planning and consultation for decommissioning or mine closure until resources are depleted or a mine is forced to shut down for operational or economic reasons JET planning will now also need to feature in decommissioning and postmine closure consultations

To avoid a scenario where junior miners bite off more than they can chew with respect to their liability for mine closure, it is important for mine closure considerations to feature prominently in transaction negotiations and terms

This is also in the interests of the seller, who remains liable for historic environmental pollution or degradation caused, after disposing of the asset Failing to do so may have fatal consequences in future for all parties, especial-

ly in light of environment, social and governance (ESG) and sustainable finance trends

An agreed sustainable end state will differ from project to project, as this depends on stakeholders’ expectations and feasibility, but could conceivably include communityowned climate change mitigation and adaptation projects (which could be eligible for carbon credits), nature or biodiversity-positive projects (which could be eligible for biodiversity credits), circular economy projects, or social development projects

The rise in ESG and sustainable finance may mean that new sources of finance could be made available for post-mine closure projects, especially from development finance institutions and the private sector, which can be

THE RISE IN ESG AND SUSTAINABLE FINANCE MAY MEAN THAT NEW SOURCES OF FINANCE COULD BE MADE AVAILABLE

used to bolster the mine s funding for such projects

Mining companies may also need to collaborate with other responsible mining companies and use technology to address environmental impacts caused by mining

Informed by practical considerations, stakeholder experiences, science and scenario analysis, the government s role is to provide decisive leadership through policy and action Policies and regulations relating to energy, mining, JET, climate change, the environment, tax and sustainable finance must be reconcilable and cohesive

Consistency is key to attracting finance for sustainable development projects

The government can also play an instrumental role in de-risking post-mine closure

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projects (especially JET-related projects which lack precedent), as it did with the renewable energy independent power producer procurement programme, to attract private finance Postmine closure projects would also need to align with local and provincial government’ s JET plans

Because mine employees are key stakeholders who are affected by mine closure, labour unions will also play an important role in developing effective partnerships for post-mine closure Labour unions will play an important role in helping mines to facilitate reskilling and training programmes which are necessary for post-mine closure projects and negotiating on behalf of workers

Establishing appropriate community engagement forums and structures before or during the life of mine is an essential ingredient for building effective partnerships for post-mine closure Host communities are a key stakeholder in mining projects, and what the Komati project demonstrates is that any decommissioning or repurposing project established without their involvement would be fundamentally flawed

While mine closure is inevitable for any mine, the JET and the global move towards net zero by 2050 will affect the pace of coal mine closure in SA To avoid unjust consequences, including job losses, stranded assets, community underdevelopment and environmental disasters, all stakeholders, including mining companies, the government (across all levels and departments), labour unions and host communities need to collaborate to build effective partnerships for post-mine closure

Transition planning is key and every coal mine should be considering the JET as part of their iterative decommissioning and mine closure planning processes

COP28: the good and the bad

• Multidisciplinary effort needed to address climate change crisis

Natalie Scott & Janice Geel Werksmans

The United Nations Climate Change Conference of the Parties to the UN Framework Convention on Climate Change 2023 (COP28) came to an end on December 13 2023 in the UAE Arguably the largest international climate change conference, it was attended by about 197 countries comprising about 85,000 participants who contributed to the various outcomes of COP28

Following years of negotiations by participating countries on the establishment of a Loss and Damage Fund during the annual Climate Change Conference of the Parties to the UN Framework Convention on Climate Change, António Guterres, the UN Secretary-General, urged developed countries to establish and contribute towards the fund to facilitate climate change justice, specifically in developing countries The Loss and Damages Fund, which was not yet operational prior to COP28, has been an enduring demand of developing countries, especially those developing countries that contribute the least to the climate change crisis but face the harsh consequences thereof, such as floods, droughts and food insecurity

In a landmark decision on the first day of COP28, delegates not only agreed to a historic agreement on the Loss and Damage Fund but developed countries also pledged about R13bn towards the fund As the climate crisis

gets progressively worse and the consequences become more severe, the Loss and Damage Fund is one of the outcomes of COP28 which will assist vulnerable developing nations to mitigate the impact of climate change Guterres, in addition, reported during the early days of COP28 that 2023 was the hottest year on record since 1850, with average temperatures about 1 48°C warmer than the pre-industrial period of 1850 to 1900

The results of the Copernicus Climate Change Service confirmed that global temperatures are edging closer to the 1 5°C, contrary to the objectives set out in Article 2(1)(a) of the Paris Agreement

2023 WAS THE HOTTEST YEAR ON RECORD SINCE 1850, WITH AVERAGE TEMPERATURES ABOUT 1.48°C WARMER

In the face of increasing concentrations of greenhouse gases due to human activities and industrial processes, Guterres appealed to the participants of COP28 to phase out fossil fuels to decrease greenhouse gas emissions to alleviate the effects of the climate change crisis

Despite the grim prospects on the climate change crisis articulated at COP28, it is noteworthy that the oil-producing and exporting countries recognised the need to reduce

TAKING THE HEAT

methane gas emission and move towards “ zero ” methane gas emission by 2030 An assessment by the UN Environment Programme reported the devastating effects of methane gas emission on the environment, citing that it contributes to the formation of groundlevel ozone, a hazardous air pollutant and greenhouse gas that results in about 1-million premature deaths annually

In response to the oil-producing and exporting countries’ commitment, Guteress noted that these commitments do not pass muster as the commitment falls short of what is required to meaningfully address the contribution of this industry to the climate change crisis

COP28 was filled with historic moments, one of which was the Declaration on Sustainable Agriculture, Resilient Food Systems and Climate Action (Sustainable Agriculture Declaration), which was signed by 152 countries (as of December 10 2023)

Surprisingly, SA (as of December 10 2023) was not a signatory of the Sustainable

Agriculture Declaration despite the agriculture industry in SA being reported as the fastest growing sector of the South African economy in the second quarter of 2023, contributing about R60 2bn to SA’ s gross domestic product

The objectives of the Sustainable Agriculture Declaration include (i) promoting food security and nutrition through targeted research and innovation, (ii) strengthening the integrated management of water in agriculture and food systems to ensure sustainability and (iii) advancing resilience activities to reduce the vulnerability of the stakeholders in the agricultural sector Notwithstanding the explicit objectives set out in the Sustainable Agriculture Declaration, the declaration does not contain any timeframe on when the signatories aim to achieve the objectives set out therein

Participants at COP28, such as the UK, France, the Netherlands and US, were among 22 countries that adopted the Declaration to Triple Nuclear Energy (Nuclear Energy Declaration), which emphasises the need

for global efforts that will accelerate zero and low carbon emission technologies such as nuclear, renewable, abatement and removal technologies

In terms of the Nuclear Energy Declaration, the signatories pledge to (i) advance global aspirational goals of tripling nuclear energy capacity by 2050, (ii) ensure nuclear power plants that they operate domestically are in line with the highest safety standards and (iii) mobilise investments in nuclear power through innovative financing mechanism The Nuclear Energy Declaration could therefore play an integral part in global efforts to achieve the net zero objectives set out in the Paris Agreement, provided the objectives are attained in a sustainable manner

During COP28, the UN Environment Programme and the Cooling Coalition in its Global Cooling Watch for 2023 noted that rising global temperatures necessitate a growing demand for cooling equipment Accordingly, it was reported in the Global Cooling Watch for 2023 that an integrated action plan comprising of (i) passive strategies to reduce cooling demands, (ii) higher energy efficiency standards and norms for cooling equipment and (iii) a reduction in hydrofluorocarbon refrigerators is required to address the impact of the cooling sector on the climate crisis

In response, 60 partici-

OIL-PRODUCING AND EXPORTING COUNTRIES RECOGNISED THE NEED TO REDUCE METHANE GAS EMISSION

pating countries at COP28 made a commitment to reduce the greenhouse gas emission associated with the cooling sector by 2050

Last, a coalition of 30 participating countries at COP28 announced their commitment to mutually recognise clean hydrogen certificates in line with the Declaration of Intent on Mutual Recognition of Low-Carbon Hydrogen Certification Schemes (Hydrogen Certification Declaration) and ISO/TS 19870: 2023 to ensure producers sustainably produce and trade green hydrogen In addition, the main objective of the Hydrogen Certification Declaration is to enable the long-distance cross-border flow of low-carbon hydrogen that is produced from renewable sources of energy

It is evident from the various outcomes from COP28 that a multidisciplinary concerted effort is required to address the contributing factors and consequences of the climate change crisis Even though the participants of COP28 made numerous commitments to address the climate change crisis, it remains unclear whether the objectives set out in the commitments will be achieved and, if so, whether it will alleviate the ramifications of global warming

Nevertheless, South African companies engaging in transactions with multinational companies in jurisdictions that have signed and adopted any of the declarations approved by the participating countries at COP28 should consider incorporating the objectives of the COP28 declarations into the internal policies (if not already done) to ensure they remain competitive in the global market

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