Business Law & Tax (BD, April 2022)

BUSINESS LAW &TAX

APRIL 2022 WWW.BUSINESSLIVE.CO.ZA

A REVIEW OF DEVELOPMENTS IN CORPORATE AND TAX LAW

Plan to limit foreign nationals

legislation could reduce •theNew number employed in SA Henry Rossouw, Curtis Nhliziyo & Tyrone Roode ENSafrica

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bill and policy published by employment & labour minister aims to limit the extent to which employers who are operating in SA can employ foreign nationals in possession of a valid work visa, and imposes stricter obligations on an employer engaging foreign workers.

The Employment Services Amendment Bill aims to amend the Employment Services Act, 2014 (act) and proposes that sections 8 and 9 of the act which govern the employment of foreign nationals and prohibited acts in respect of foreign nationals respectively, be repealed in their entirety.

The government has proposed the insertion of an entirely new chapter (currently titled “3A”), regulating the employment of foreign nationals generally. Of great interest in this chapter is Section 12B, dealing with the quotas for employment of foreign nationals.

Section 12B(1) provides that “the minister, after consulting the board, may, by notice in the Gazette, specify

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a maximum quota for the employment of foreign nationals by employers in any sector.” [our emphasis added].

Section 12B(2) goes on to say that these quotas may apply to employees or workers “in one or more sectors specified in the notice; in one or more occupational categories specified in the notice; nationally; or to one or more regions specified in the sector”.

In addition to the limitation on the employment of foreign nationals, the bill proposes that foreign nationals be precluded from starting small businesses in certain business sectors. Amendments to the National Small Business Act, 1996 will accompany these proposed amendments.

The draft national labour migration policy, which was also recently published, supplements the provision for

THE BILL PROPOSES FOREIGN NATIONALS BE PRECLUDED FROM STARTING SMALL BUSINESSES IN CERTAIN BUSINESS SECTORS

RIGHT TO WORK

/123RF — SPH1410 the imposition of quotas, stating that this is one of the priorities provided for in SA’s various national policy frameworks and international and regional commitments.

Precisely how these proposed quotas would play out in practice remains unclear: will they apply equally to foreign nationals who are already in employment or only to appointments of new employees going forward, should the bill be passed into law?

The policy’s stated aims

are to: ● Improve South African employee expectations of fair access to work opportunities in light of increasing unemployment rates; and ● Alleviate the adverse perception that foreign nationals are creating barriers to entry in the labour market.

A further interesting element of the proposed amendments relates to “digital labour platforms”. According to the bill, “a digital labour platform is an employer and any person who provides work or services in the

Republic to another person by means of a digital labour platform is a worker if: (a) the payment for, or terms and conditions of, such work or services are determined by digital labour platform; and (b) the digital labour platform remunerates ‘the worker’.”

The addition of this provision appears to be aimed at ensuring the amended act applies to workers who are employed through digital platforms, such as Uber and Bolt drivers. This is in line with the global trend to pro-

tect platform workers, who form part of the new gig economy and are often considered a vulnerable group in themselves.

Recently, the Ontario government in Canada launched a bill titled the Digital platform workers’ rights Act”, which envisages certain rights and protections for individuals who provide services through digital platforms.

The bill’s proposed protections include: ● A minimum wage rate; ● A regular pay period and recurring pay day; and ● The requirement of written notice before removing a worker from the digital platform and a written explanation regarding the reasons access is being removed.

While the proposed amendments are not as farreaching as those proposed in Canada, they remain of particular importance to South African employers as, if implemented, they could have extensive implications for the composition and regulation of many workforces across the country.

PLATFORM WORKERS FORM PART OF THE NEW GIG ECONOMY AND ARE CONSIDERED A VULNERABLE GROUP

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BusinessDay www.businessday.co.za April 2022

BUSINESS LAW & TAX LATERAL THINKING

Continent of opportunity

Business Day Law & Tax editor Evan Pickworth interviews Michael Foundethakis, recently •appointed chair of the Africa steering committee at global law firm Baker McKenzie.

Foundethakis is a partner, head of the banking & finance practice in Paris and the firm’s global head of project and trade & export finance

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ue to the nature of his practice, Michael Foundethakis’ primary focus has always been on emerging markets, with a particular emphasis on sub-Saharan Africa, a region in which he has been involved since the mid-1990s.

EP: As the new global chair of the Africa steering committee for Baker McKenzie, what is your strategy for ensuring you are able to win roles advising on groundbreaking transactions in Africa?

MF: Our strategy has been to help our clients navigate the impacts of the pandemic and to structure our advice in a way that takes into account the specific needs of their businesses and the sectors in which they operate.

Our ambition has been to enable our clients to grow in a sustainable, inclusive way that offers value to their businesses, and to the communities and environments in which they operate. And our strong and enduring client relationships have enabled us to grow our existing client base and build new ones, despite the pandemic, in our key strategic markets of the Maghreb, non-Francophone North Africa, Francophone West Africa, Anglophone West Africa, East Africa, Southern Africa and Lusophone Africa.

Our geographic coverage in Africa includes more than 100 lawyers based in our three Africa-based offices, more than 200 Africa specialists across 76 offices, and a network of 100 carefully selected African relationship firms in 51 African jurisdictions.

EP: Can you tell me more about interesting transactions you and your team have worked on in Africa recently?

MF: An interesting transaction we have acted on is one that just won GFC’s Bonds and Loans Project & Structured Finance Deal of the Year, which was awarded to the ministry of finance & planning for Tanzania in early March. Our team acted as lenders’ legal counsel to Standard Chartered Bank and the other commercial lenders, development finance institutions and export credit agencies on this transaction.

This was a $1.46bn financing to the Tanzania government in connection with the construction of the Standard Gauge Railway (SGR) Project.

Running about 550km, the SGR project is one of the country’s biggest projects connecting Dodoma to Dar es Salaam via Morogoro and Makutupora.

Once complete, it will provide a safe and reliable means for efficiently transporting people and cargo to and from the existing Dar es Salaam port. The deal represents the largest project financing to date for a sovereign state in East Africa.

We also recently worked

on an exciting transaction involving our teams in the Paris, London and Johannesburg offices. We advised a syndicate of 23 banks, led by Bank of America Europe DAC and Standard Chartered Bank as sustainability coordinators, and Commerzbank as facility agent, on a $600m sustainability-linked term loan facility agreement for Investec Bank Limited of SA. It is the first sustainability-linked syndicated loan signed by Investec Bank Limited, coming hot on the heels of an earlier sustainability-linked financing to Investec Bank plc, on which my team also advised the lenders.

Our team also advised on the GFC Media’s International Syndicated Loan Deal of the Year which was awarded to African Export Import Bank (Afreximbank). A team from Cairo, London, Paris and Tokyo acted for a syndicate of more than 30 banks led by MUFG Bank in relation to a circa $1.1bn dual tranche term loan facilities agreement to Afreximbank.

EP: Is there a lot happening in Africa at the moment, do you see opportunities?

MF: Our prediction is that

Africa could well be one of the only major regions to experience an acceleration of economic growth in 2022.

This reflects a modest improvement on a difficult 2021 for much of the continent. We expect that oil exporters will gain from a further increase in international oil prices, while nonoil commodity exporters will receive an uplift from rising food and industrial raw materials prices. Economic growth in China is expected to be moderate in 2022, but a forecast 5% expansion in China’s real GDP will still be sufficient to support continuing demand for Africa’s exports.

/123RF — HIBRIDA

We have predicted that most of the region’s heavyweights (Algeria, Angola, Ethiopia, Nigeria, SA and Zambia) will again underperform and the smaller more dynamic trading economies (especially Senegal, Ivory Coast and Ghana in West Africa and Uganda, Rwanda, Tanzania and, to a lesser extent, Kenya in East Africa) will lead the way in terms of real GDP growth.

PE deal value for targets in Africa contracted sharply following the end of the commodity boom, from a record $12.02bn in 2014 to $1.44bn in 2017.

With the onset of the pandemic, 2020 saw such transactions contract further, to just $1.25bn. However, a significant recovery in deal flow is expected in 2022 and 2023.

In terms of the legal market, there has been rapid growth in Africa, as well as ever-increasing competition from international, regional and local law firms, and accountants.

International law firms have continued to form strategic alliances with local law firms and open offices in key jurisdictions, Kenya in particular.

Africa is also experiencing high growth from a technology perspective, including investment from global tech companies, and with a tech start-up boom providing opportunities for law firms.

Baker McKenzie is well placed to support this growth.

Our focus in Africa continues to be on transactional practice areas including M&A, projects and banking and finance in the key sectors of infrastructure development, mining, energy, commodities and financing of the same.

Disputes, international arbitration and compliance and investigations are also key areas of focus. One of the firm’s key service lines is a focus on sustainability with particular emphasis on the energy transition and sustainable finance.

So, yes, there are considerable opportunities across the continent, but not without responsibility.

As well as being bankable and yielding attractive returns, it is increasingly imperative that investment should be sustainable and provide ancillary benefits to

local economies. Simply put, it should be net positive for the region.

EP: You work from Baker McKenzie’s Paris office, what role does the EU play in funding African projects?

MF: The EU has a strong relationship with Africa that has lasted many decades. Recent developments have pointed to a deepening relationship.

For example, in February 2022 European Commission president Ursula von der Leyen announced investment funding for Africa worth €150n at a joint press conference with newly appointed AU head Macky Sall. The funding package is part of the EU Global Gateway Investment Scheme, with billions of euros promised for infrastructure development projects across the continent.

This funding is said to be in the form of EU combined

YES, THERE ARE CONSIDERABLE OPPORTUNITIES ACROSS THE CONTINENT, BUT NOT WITHOUT RESPONSIBILITY member funds, member state investments and capital from investment banks. The current conflict in the Ukraine could, of course, affect or change the dynamics and/or timing of these proposals.

EP: How does Africa want the partnership with the EU to work?

MF: AU member states noted that their primary needs included support in terms of safety and security on the continent as well help in implementing the AfCFTA, [the African Continental Free Trade Area] and the huge infrastructure investment it needs to be successful.

In 2020, then AU chair Cyril Ramaphosa said in his inaugural speech that the AU needed “African solutions to African problems”, setting the tone for a deepening relationship with Europe that was balanced and to the benefit of all. The commission acknowledged Ramaphosa’s comments, saying that Africa wants to take its future into its own hands and that Europe needs a strong Africa.

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BusinessDay www.businessday.co.za April 2022

BUSINESS LAW & TAX ENVIRONMENTAL, SOCIAL AND GOVERNANCE

SA firms had better prepare for EU laws

STRONGEST LINKS

Bloc’s ESG directive will require companies to •provide data on products and supply chains Koos Pretorius, James Brand & Mansoor Parker ENSafrica

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rticle 4.8 of the draft EU Directive stipulates that EU undertakings shall ensure that their business relationships put in place and carry out human rights, environmental and good governance policies that are in line with their due diligence strategy, including for instance, by means of framework agreements, contractual clauses, the adoption of codes of conduct or by means of certified and independent audits.

EU undertakings shall ensure their purchase policies do not cause or contribute to potential or actual adverse impacts on human rights, the environment or good governance.

Article 4.9 of the draft EU Directive provides that undertakings shall regularly verify that subcontractors and suppliers comply with their obligations under Article

4.8. It is also anticipated that EU undertakings should set up an internal value chain mapping process that involves making proportionate and commensurate efforts to identify the business relationships throughout all stages of their value chain.

Article 5 of the draft EU Directive furthermore makes provision for a complaints or grievance process that may be initiated by any stakeholder, including persons whose rights and interests may be affected by any decision of an EU undertaking.

The “stakeholder” concept includes workers, local communities, children, indigenous peoples, citizens, associations, shareholders and

SUPPLY CHAINS WILL NEED CONSIDERABLE AMOUNTS OF DATA TO PROVIDE VISIBILITY ACROSS THEIR NETWORK

organisations whose statutory purpose is to ensure that human and social rights, climate, environmental and good governance standards are respected, such as trade unions.

These stakeholders are not confined to those present in the EU. This is in apparent recognition of recent international law developments where parent companies have been found to have incurred common law duties of care to foreign claimants as seen in the Dutch Court of Appeal, where the parent company of the Shell Group was held to have incurred a duty of care to farmers in the Niger Delta (see too the UK Supreme Court decision of Lungowe v Vedanta Resources plc and Okpabi and others (appellants) v Royal Dutch Shell Plc and another (respondents).

Article 13.6 of the draft EU Directive stipulates that EU member states shall ensure that, if the failure to comply with the EU Directive could directly lead to irreparable

/123RF — NOMADSOUL1 harm, the adoption of interim measures by the EU undertaking concerned, or in compliance with the principals of proportionality, the temporary suspension of activities may be ordered.

IMPORT BAN

In the case of EU undertakings governed by the law of a nonmember state that operate in the internal EU market, the temporary suspension of activities may imply a ban on importing into or operating in the EU internal market.

In summary, if the draft EU Directive is adopted in its current form, it is clear that compliance by EU undertakings with their due diligence obligations, including in respect of suppliers and operators outside of the EU, will be a condition for access to the internal EU market.

This is not the only proposed EU law that has poten-

tial implications for undertakings outside the EU that export into the EU. On July 14 2021, the EU Commission presented various policy measures and proposals aimed at reducing greenhouse gas emissions of EU member states and their business partners.

The most contentious of these, from an international point of view, is the Carbon Border Adjustment Mechanism (CBAM), due to take effect in a transitional form from January 1 2023 and be fully operational from January 1 2026.

It aims to avoid carbon tax leakage for certain product imports into the EU (such as aluminium, cement, iron and steel, electricity and fertiliser) that are not subject to carbon tax in their country of production and which are manufactured using fossil fuels.

The CBAM foresees an

import levy on EU imports of these products, depending on the emission content of production and the difference between the EU Emissions Trading System price and any carbon price or tax paid in the country of production.

It remains to be seen how this proposed EU mechanism will interface with SA’s existing carbon tax regime in terms of our Carbon Tax Act, 15 of 2019 and whether allowances or rebates will apply as a result of our domestic carbon tax.

SA carbon taxpayers who reduce the SA carbon tax liabilities through permissible allowances and deductions may then pay a higher import carbon tax when their goods are imported into the EU. While external motivators from the EU are likely to become a more present reality for SA businesses when it comes to ESG, internally SA’s Treasury is driving its own ESG agenda and has already published the second draft of its green taxonomy.

This document provides an indication of the technical and legal criteria that would need to be fulfilled on a sector-by-sector basis to be considered ESG aligned from an SA perspective. It will be interesting to see how potential future ESG requirements in the EU align with our own green taxonomy.

One thing is clear: supply chains will need considerable amounts of data to provide visibility across their global network.

The sooner SA undertakings start on their ESG journey and set up platforms for data capture and reporting, the sooner they will be ready to adapt to both the locally and internationally developing ESG regimes.

Mining green metals part of just transition Lloyd Christie & Zinzi Lawrence ENSafrica The Integrated Resource Plan (IRP), which was released on October 18 2019, maps out SA’s current and future electricity demand and provides for nine policy interventions to ensure the security of SA’s power supply.

The IRP recognises that coal will continue to play a significant role as a source of energy in SA while also recognising that a diversified energy mix that reduces over-reliance on a single or a few primary energy sources is apt.

The IRP provides for new additional capacity of 1,500MW from coal, 2,500MW from hydro, 6,000MW from solar photo-

voltaic, 14,400MW from wind, 2,088MW from storage and 3,000MW from gas.

It is significant that the etymological root of “energy” means “work” or “to do” since what are we “to do” when there will no longer be “work” for “stranded workers” of “stranded assets” in high-carbon sectors because of the need to transition to a low-carbon economy?

The need exists because of doubts about the ability of the world energy supply infrastructure to meet the rising global demand in circumstances where the present trends in energy consumption are neither secure nor sustainable. But “energy drives the world” and an energy transition is therefore inevitable and social implications unavoidable.

Thus, the urgent call has been sounded for this transition to be a just transition; not just in SA, where the “beyond coal” campaign has become part of the national debate, but globally.

Sustainable mining, within a green economy, will continue to offer a solution.

The current energy system relies overwhelmingly on fossil fuels and the associated combustion technologies. The transition from a fossil fuel base to an alternative energy system relies, in particular, on metals to manufacture and maintain energy conversion technologies.

These low-carbon technologies rely on “green metals”, and the utility of these metals relies on their extraction and that, in turn, relies on a mine being established.

The establishment of the mine produces quality jobs and often alleviates the inequitable distribution of energy services experienced in remote areas. This mine could itself be decarbonised by being powered by solar energy and functioning with electric vehicles, smart devices and electric and battery-operated mining equipment. It must, however, be noted that in manufacturing these electric-powered devices, the manufacturing industry will generate its own carbon footprint, which must also be addressed.

This mine may therefore be the very testimony of the full green economy life cycle if it happens to mine green metals such as aluminium, chromium, cobalt, copper, manganese, platinum or

nickel, which are used in the deployment of renewable energy technologies and the manufacturing of electric vehicles, smart devices, lithium-ion batteries or alternative batteries based on hydrogen fuel cells.

The SA Planning Commission’s National Development Plan envisages the SA transition to be to a low-carbon, resilient economy and a just society in which all sectors of society are actively engaged in building a competitive, resource-efficient and inclusive future.

The transition to a lowcarbon economy is often portrayed as being in conflict with mining and it is generally assumed that natural resource-based economic activities have no future in a low-carbon economy. How-

ever, the transition will rely heavily on the availability of the metals and minerals necessary for the manufacturing of clean technologies.

The World Bank, in its research titled The Growing Role of Minerals for a Low Carbon Future, 2017, estimates that the world will require almost double the volume of mined minerals and metals currently produced to establish sources of energy such as solar panels and wind technology.

It is therefore important that SA positions itself in a manner that will enable the country to take advantage of the future commodities market and to meet the increased demand for metals within a low-carbon economy while at the same time creating good-quality jobs.

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BusinessDay www.businessday.co.za April 2022

BUSINESS LAW & TAX ENVIRONMENTAL, SOCIAL AND GOVERNANCE

Africa poised for investment

Continent has potential for •ESG-aligned projects — it just

CIRCLE OF TRUST

implement and enforce these laws at domestic level is one of the greatest challenges to mitigating climate change, reducing pollution and preventing widespread species and habitat loss.

Only if an investment is compliant with both the investors’ and investees’ regulatory frameworks on ESG criteria will the investment be truly ESG compliant and constitute a holistic “sustainable investment”.

needs to start adopting metrics Jessica Blumenthal, James Brand & Dalit Anstey ENSafrica

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he adoption of environmental, social and governance (ESG) criteria is on the rise, unlocking capital for ESGcompliant projects and investment in companies that have integrated ESG into their business.

Despite Africa’s diverse natural resources, renewable energy potential, human capital and significant development opportunities, connecting investors with investees on the continent is not straightforward. This gives rise to missed opportunities and stifles the ability of ESG investment to flow into projects in Africa that would otherwise support ESG investment mandates.

African investees need to position themselves to take advantage of ESG-related opportunities.

When looking at the country-by-country analysis of voluntary or mandatory measures to incorporate a consideration of ESG factors (as set out on the Principles for Responsible Investment’s website), Africa is far behind.

However, the focus on the continent is different. Institutional and private investors of developed countries are able to bring vast investment to the ESG table (and as such legislation is needed to direct these funds to sustainable investments).

Africa’s contribution is the potential it has for projects aligned with ESG-related criteria that are able to achieve the UN’s sustainable development goals. There are many sustainable projects, innovations and companies operating across Africa whose operations align with ESG-related criteria.

The key to unlocking this potential is getting investors comfortable with the risks typically associated with investing in developing markets and identifying “sustainable investments” that can deliver adequate returns.

What is considered to be a

EMBRACING THE FRAMEWORK IS AN OPPORTUNITY FOR AFRICAN BUSINESSES TO SEND OUT A STRONG MESSAGE

ESG STANDARDS

/123RF — ELNUR sustainable investment?

Within the EU, there has been a lot of debate about what qualifies as a “sustainable investment”. This question has implications for investors to ensure compliance with the suite of EU ESG laws discussed above.

From the investees’ point of view, this is required to ensure eligibility for investment. The development of any new regulation is accompanied by issues about standardisation, classification and defining concepts to find universal meaning.

However, this is a difficult task when dealing with an inherently polycentric topic such as ESG, which involves technical, scientific, technological, legal, policy and economic input, and is also contextually influenced.

Projects involving sustainable investment are required to meet the relevant host country’s regulations, which in most cases in Africa includes environmental compliance. In addition to being required to understand their own regulatory requirements within the EU, EU investors should also familiarise themselves with the regulatory environments surrounding a particular investment or project in Africa to understand if it is compliant with local laws and regulations on ESG issues.

The UN Environment Report of January 2019 titled Environmental Rule of Law (UN Environment Report) found that despite a 38-fold increase in environmental laws put in place worldwide since 1972, failure to fully

It is crucial that both investors and investees familiarise themselves with the contexts and regulatory environments of both the jurisdictions from which and into which money is being invested. Responsible investing and jurisdiction specific due diligence will be key.

In September 2020, the leaders of the “big four” accounting firms came together in a joint initiative to unveil a reporting framework for ESG standards. The drive to create a common ESG accounting framework has been driven by a rising frustration among investment groups over the lack of a harmonised system for measuring sustainability. To report against the core ESG metrics in the framework should not be a challenge for “mature” businesses that have already integrated ESG into their businesses.

However, for those businesses that have not yet integrated ESG into their business, significant work will be required.

The proposals are voluntary so at this stage no business will be compelled to report against them, but the pressure will grow for organisations to adopt them.

African companies that get ahead and start adopting the ESG metrics increase their potential attractiveness to investors. Embracing the framework is an opportunity for African businesses to send out a strong message to investors internationally about their commitment to the ESG agenda.

The exploitation of African resources has left its mark on the continent, with countries facing complex legacies and challenges. Africa as a continent is one of the least responsible for climate change, but stands to suffer the most from its effects.

As a result of Covid-19, stimulus spending amounting to the equivalent of trillions and trillions of dollars is being injected into the global economy at scales that are unprecedented and have never been seen before.

To benefit from ESG and impact investing, African companies need to position themselves to take advantage of these new funding opportunities as the world seeks to build back better.

Exporters to EU must sharpen ESG tools Koos Pretorius, James Brand & Mansoor Parker ENSafrica On March 10 2021, the European parliament adopted a resolution (EU Resolution) and issued recommendations including a draft directive (EU Directive) in respect of the corporate due diligence and accountability of undertakings with business activities in the EU. Once the EU Directive is passed, it is likely to have farreaching implications for suppliers of goods and products in countries outside the EU that sell products or provide services within the EU. These developments need to be carefully monitored by participants in the SA agribusiness sector who export to the EU market.

From a destination point of view, Africa and Europe continued to be the largest markets for SA’s agricultural

exports, absorbing 38% and 27% of total exports in 2020, in value terms, respectively.

The top products to these markets over this period were beverages, fruit, grains, sugar and vegetables.

The EU Resolution makes it clear that the European parliament has embarked on a course that is aimed at ensuring accountability of EU undertakings for any activity that may cause harm to human rights, the environment and good governance, internationally. These considerations are commonly referred to as environmental, social and governance (ESG) objectives.

While the EU Directive is still to be adopted, it is clear from the introduction, the wording of the EU Resolution and the draft EU Directive itself that the future and finalised EU Directive is intended to have extraterritorial application beyond EU

borders. This legislation will be directed at EU undertakings to ensure ESG alignment throughout the supply chain.

The draft EU Resolution also means that undertakings operating outside the EU that want to remain in business with EU undertakings will also need to comply with the EU Directive (once adopted) and adhere to these same ESG objectives.

In practical terms, this means that EU undertakings will in future be required to undertake due diligence investigations and publish results not only in relation to their own ESG compliance, but also in relation to the activities of other participants in their value chain, such as their suppliers.

These investigations, among other things, will be required to focus on: ● Environmental: the activities of suppliers in respect of their production of waste, dif-

fuse pollution and greenhouse gas emissions, deforestation and any other impact the suppliers may have on the climate, air, soil and water quality, the sustainable use of natural resources, biodiversity and ecosystems. ● Social: whether such suppliers are adhering to appropriate standards applicable to the basic working conditions of their employees, whether these employees have the right to be unionised, whether suppliers make use of any child, forced or compulsory labour and other consideration concerning freedom of association, collective bargaining, minimum age, occupational safety and health and equal remuneration. ● Governance: whether suppliers have anticorruption and anti-money laundering measures in place that are implemented and whether the management of suppliers

adhere to appropriate governance standards to facilitate transparency, access to information and accountability in respect of their business activities.

The EU Resolution furthermore indicates that compliance by EU undertakings with these obligations in respect of their suppliers should be a condition for access to the internal EU market. This is likely to require suppliers and other operators (importers and freighting agents, for example) to provide evidence that the products they place on the EU market are in conformity with the ESG criteria set out in the future due diligence legislation.

Until that legislation matures, some guidance for agri-exporters to the EU is to be found in the OECD-Food & Agricultural Organisation Guidance for Responsible Agricultural Supply Chains,

which is referred to in the EU Resolution.

The potentially far-reaching effect of the proposed legislation is aptly illustrated by the definition of “supplier” in the EU Resolution, which means any undertaking that provides a product, part of a product, or service to another undertaking in the EU, either directly or indirectly, in the context of a business relationship.

Similarly, the relevant “value chain” means all activities, operations, business relationships and investment chains of an EU undertaking.

This includes entities that the undertaking has a direct or indirect business relationship with, upstream and downstream, and that either supply products, parts of products or services contributing to the EU undertaking’s own products or services, or, receive products or services from the EU undertaking.

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BusinessDay www.businessday.co.za April 2022

BUSINESS LAW & TAX

Procurement finds itself in muddy waters

CORRECT CRITERIA

confirms state’s regulations are unlawful •butTopit iscourt not clear if there is still a grace period Megan Adderley & Roxy Harrington Webber Wentzel

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egulatory uncertainty abounds in the procurement space after the recent Constitutional Court judgment upholding the decision by the Supreme Court of Appeal (SCA) to invalidate the 2017 Preferential Procurement Regulations.

In 2018 the National Treasury estimated SA’s annual spend on public procurement was R938bn. Public procurement is critical to service delivery, transformation and job creation. It requires sound and prudent financial management to ensure the state gets value for money.

On February 16 the Constitutional Court in Minister of Finance v Afribusiness NPC dismissed the appeal by the finance minister against the SCA judgment which had declared invalid the Preferential Procurement Regulations 2017, which provide detailed instructions for the adjudication of procurement processes. In other words, the judgment confirmed the

regulations are unlawful in their entirety.

It created great uncertainty in relation to the procurement regulatory regime and brought state procurements to a grinding halt.

The SCA suspended the order that the regulations are invalid for 12 months to provide legal certainty and allow the finance minister time to

THE JUDGMENT CREATED GREAT UNCERTAINTY IN RELATION TO THE PROCUREMENT REGULATORY REGIME rectify the errors in the regulations. The Constitutional Court’s judgments (majority and minority) have created some confusion as to whether the suspension on the order of validity granted by the SCA continues to run or whether the suspension has lapsed, resulting in the immediate invalidity of the regulations.

This has caused uncer-

tainty for both tenderers and organs of state about the current legal regulatory regime.

As a result, the minister has filed an urgent application to the Constitutional Court to seek clarification.

Due to the regulatory turmoil that will ensue if the court decides the declaration of invalidity takes place immediately, it is likely a suspension of some sort will be granted.

The Treasury, in an advisory note dated February 25, attempted to assist with navigating the uncertain regulatory regime during this interim period. It advised that, while tenderers and organs of state await an answer from the Constitutional Court, tenders advertised before February 16 2022 will be finalised in terms of the regulations.

Tenders advertised on or after February 16 2022 will be held in abeyance. And no new tenders will be advertised.

On March 3 2022, the Treasury issued a follow-up advisory note, further clarifying that organs of state have scope to determine their own preferential procurement policies. The Treasury said that these policies must be

/123RF — ARTEMSAM formulated by an accounting officer/authority, in line with the framework set out in section 2 of the Preferential Procurement Policy Framework Act and other applicable legislation.

Furthermore, it advised that organs of state may, in terms of section 3(c) of the act, seek an exemption from the provisions of the act for a specific procurement or category of procurement requirements.

In a helpful attempt to address the confusion and paralysis plaguing public procurement in SA, draft preferential procurement regulations (2022 regulations) were hurriedly published for public comment on March 10 2022.

The deadline for comments is April 11 2022.

The 2022 regulations are essentially a watered-down version of the 2017 regulations. They prescribe the thresholds for using the

80/20 and 90/10 preference point systems, together with the formula to be applied.

They also include other matters such as: the criteria for breaking the deadlock in scoring; awarding contracts to tenderers that do not score the highest points; and what remedies organs of state should apply if false information is supplied by tenderers when submitting tenders for evaluation. They omit regulations relating to prequalification criteria, subcontracting and local content, with which the SCA and Constitutional Court had found fault.

Furthermore, the 2022 regulations repeal all previous regulations under section 5 of the act and therefore will replace the 2017 regulations in their entirety, when promulgated.

While we wait for the Constitutional Court’s guidance on the minister’s latest application and the promul-

gation of the 2022 regulations, the preferential procurement regulatory regime remains uncertain, and the advertising of new tenders has halted.

Some commentators have read the Constitutional Court judgment as permitting organs of state to formulate their own unique preferential procurement policies, which include aspects such as prequalification criteria, subcontracting and other mechanisms aimed at advancing transformation. That means different organs of state could include vastly different mechanisms aimed at advancing transformation in their procurement processes.

It remains to be seen whether organs of state will adopt this approach and, if they do so, what impact it will have on the uniform and consistent application of the procurement regime. The likely outcome is further litigation.

LABOUR PAINS

Greater clarity on vaccination mandates at work

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s is to be expected, as time goes by we will see greater clarity on the management of Covid-19 in workplaces and the application of mandatory workplace vaccination policies.

The Commission for Conciliation, Mediation and Arbitration (CCMA) arbitration award in Dale Dreyden v Duncan Korabie Attorneys (WECT13114-21, was published on March 7 2022. CCMA arbitration awards are not necessarily precedent setting, but they invariably do give insight into how the labour courts may view employer conduct in cases of dismissal on grounds of refusal to vaccinate against Covid-19.

In this case, the employer,

TONY HEALY an attorney, operated his legal practice from his residential home. He had experienced significant health challenges and comorbidities, which rendered him highly vulnerable to infection. In fact, doctors had advised the employer to minimise his exposure to the virus as far as possible.

For security reasons, employees could not be allowed to work remotely.

Additionally, the applicant was required to work under the direct supervision of the employer in terms of the applicant’s contract of articles.

The respondent’s practice drafted a Covid-19 risk plan policy. In short, all employees were advised early during the pandemic that they would need to be vaccinated. The employee persisted in his refusal to be vaccinated, on the basis that he had the constitutional right not to be vaccinated, such as on grounds of bodily integrity and political opinion.

The commissioners confirmed that the dismissal of the employee was substantively fair, as the June 2021 Consolidated Direction

on Occupational Health & Safety Measures in Certain Workplaces implies that, in certain circumstances, employees may be dismissed if they refuse to vaccinate.

On March 14 2022, the labour court passed judgment Solidarity obo members & 1 other v Ernest Lowe, a Division of Hudaco Trading (Pty) Ltd (J49/22).

The employer implemented an admission policy that required employees to either be vaccinated or in apposition to produce (at their own cost) a negative Covid-19 test on a weekly basis. The employee refused to do so, and she was therefore denied access to the employer’s premises.

The labour court held that

the employer had the right to implement its admission policy, as it had, in light of the fact it had a statutory duty to “provide and maintain, as far as is reasonably practicable, a working environment that is safe and without risk to its employees”.

On March 15 2022, the Code of Practice: Managing Exposure to SARS-CoV-2 in the Workplace was gazetted.

This purpose if this code is to (1) Conduct and update a

DOCTORS ADVISED THE EMPLOYER TO MINIMISE HIS EXPOSURE TO THE VIRUS AS FAR AS POSSIBLE

Covid risk assessment (2) Develop and implement a plan to limit infection and transmission, as well as to mitigate the risks of serious illness or death (3) Manage Covid-related absenteeism and (4) Seek to accommodate employees who refuse or fail to be vaccinated.

There is little doubt the unfolding case law and statutory regulations are increasingly confirming that, in certain circumstances, the dismissal of employees for refusing to be vaccinated can be upheld as being fair. ● Tony Healy is CEO at Tony Healy & Associates employer labour law consultants — www.tonyhealy.co.za

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BusinessDay www.businessday.co.za April 2022

BUSINESS LAW & TAX

Contract void?

You may still have to pay

PAPER TRAIL

provider is entitled to be compensated •forService what it has already delivered Aslam Moosajee & Inathi Mpapa ENSafrica

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he Supreme Court of Appeal recently handed down a judgment confirming that just because a contract is reviewed and set aside does not necessarily mean the respondent won’t be entitled to be compensated for what they have already delivered.

Rather, it will be up to the court to decide what a just and equitable remedy is.

The Fetakgomo Tubatse Local Municipality invited tenders for debt collection services for a period of three years. Sekoko Mameja Attorneys was awarded the tender alongside four other successful tenderers.

Sekoko was provided with a list of debtors by the municipality and was tasked with recovering the money owed by the debtors to the municipality. Sekoko duly performed its obligations between January and May 2018. However, in April 2018 the municipality realised that

Sekoko had failed to provide a valid tax certificate during the tender process, meaning that it had submitted a nonresponsive bid in contravention of the municipality supply chain management policy. As such, the municipality communicated its intention to cancel the appointment of Sekoko.

Sekoko Attorneys did not accept the termination of its appointment. The municipality applied to review and set aside Sekoko’s appointment. In response, Sekoko delivered an answering affidavit with a counter application for payment for the services rendered between January and May 2018.

The municipality did not oppose the counter application, but did not pay the

THE MUNICIPALITY REALISED THAT SEKOKO HAD FAILED TO PROVIDE A VALID TAX CERTIFICATE DURING THE TENDER PROCESS

money claimed. Despite the municipality conceding that the services were rendered

by Sekoko, the high court in Limpopo held that the award of the tender to Sekoko was inconsistent with the constitution and therefore unlawful and invalid.

Therefore, Sekoko Attorneys’ counter-application was dismissed with costs by the high court.

Before the Supreme Court of Appeal, Sekoko’s appeal was limited to the dismissal of its counterapplication for payment for the services rendered by it to the municipality prior to the review and cancellation of the award of the tender.

Sekoko argued that despite the order declaring the tender to be awarded invalidly, it was still entitled to payment based on section 172 (1)(b) of the Constitution, which states that: (1) When deciding a constitutional matter within its power, a court — (b) may make any order that is just and equitable, including: (i) an order limiting the

/123RF — SIRAANAMWONG retrospective effect of the declaration of invalidity; and (ii) an order suspending the declaration of invalidity for any period and on any conditions, to allow the competent authority to correct the defect.

The Supreme Court of Appeal remarked that an order of invalidity in terms of section 172(1)(a) of the constitution had to be applied in conjunction with the provision above.

The appeal court found that the high court failed to consider section 172(1)(b) after making its finding of invalidity in terms of the Constitution. The appeal court

remarked that in considering the invalidity of a contract, the court must consider what is just and equitable. Parties should not receive undue

THE MUNICIPALITY BENEFITED FROM THE SERVICES PROVIDED BY SEKOKO, WHILE SEKOKO HAD INCURRED COSTS benefits at the expense of an innocent party. It highlighted that the municipality did not

dispute the payment claimed

by Sekoko, nor did it participate in the appeal court proceedings, save for saying that it will abide by any order given.

In addition, the court pointed out that the municipality benefited from the services provided by Sekoko, while Sekoko had incurred costs in providing the services.

As such, the court concluded it was just and equitable for Sekoko to be paid what it would have been entitled to receive in terms of the void tender.

Sekoko Attorneys’ appeal was therefore upheld.

Disclosure to Sars must be new details Riette Lombard AJM On December 7 2021, the Supreme Court of Appeal handed down judgment in favour of the SA Revenue Service (Sars) in the case of Purveyors South Africa Mine Services (Pty) Ltd v Commissioner for the South African Revenue Services.

The appeal revolved around whether Purveyors’ voluntary disclosure relief application was valid. Specifically, whether the application was “voluntary” as per the requirements under section 227 of the Tax Administration Act, 28 of 2011.

Purveyors contacted Sars following advice obtained from a consulting firm to clarify whether it had a tax liability in the circumstances.

Sars confirmed such liability and instructed Purveyors to

regularise its tax affairs. More than a year later, Purveyors disclosed its liability to Sars by submitting a voluntary disclosure relief application.

Sars rejected Purveyors’ application on the basis that such application was not voluntary — Purveyors did not disclose any information or facts of which Sars was unaware of, since Sars was already aware of the default.

The court considered the dictionary definitions of “voluntary” and “disclosure” and found that “a sensible interpretation of the voluntary disclosure provisions, their context and purpose show that the drafters of the provisions clearly had in mind that a taxpayer who elects to inform Sars of its default runs the risk that any subsequent disclosure might not be treated as being voluntary”.

The court further stated

/123RF — BLEAKSTAR that voluntary disclosure relief cannot be obtained “in circumstances where Sars had prior knowledge of the default, regardless of the source of such prior knowledge” and that “Sars must undoubtedly not be aware of the default”.

Such a wide interpretation of the words “voluntary” and “disclosure” will significantly

limit the circumstances in which a taxpayer can apply for relief under the voluntary disclosure regime. For example, a taxpayer that opted first to obtain a ruling from Sars to confirm a liability would always be precluded from applying for voluntary disclosure relief.

And in the same vein, where a taxpayer obtained a

tax registration with a backdated effect, it will be unable to disclose its liability for the past by way of a voluntary disclosure relief application since Sars will already be aware of the default.

In both aforementioned instances, Sars’ general practice to date has been to accept a voluntary disclosure relief application as “voluntary” if the disclosure is made within a month following the ruling being issued or the taxpayer obtaining its tax registration.

This practice is not in line with the court’s interpretation of “voluntary” and “disclosure” in the Purveyors case.

While the court correctly stated that the purpose of the voluntary disclosure regime is to ensure errant taxpayers come clean, out of their own volition and without any prompting, when interpreting “voluntary” and “disclosure”

too wide, to such an extent that it is difficult for a taxpayer to even qualify for the voluntary disclosure relief, this may likely disincentivise taxpayers to engage with Sars in an attempt to disclose their liabilities in future.

Nonetheless, based on the court’s interpretation of “voluntary” and “disclosure”, taxpayers should ensure they have not had any prior interactions with Sars regarding their liability if they want to apply for voluntary disclosure relief.

VOLUNTARY DISCLOSURE RELIEF CANNOT BE OBTAINED … WHERE SARS HAD PRIOR KNOWLEDGE OF THE DEFAULT

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BusinessDay www.businessday.co.za April 2022

BUSINESS LAW & TAX

When a strike goes awry

Interdicting employees over •unlawful conduct during protest

PICKETS AND PROTESTS

action requires solid evidence

Johan Olivier, Mehnaaz Bux, Siya Ngcamu & Diyajal Ramrajh Webber Wentzel

A

recent decision by the Constitutional Court has important implications for employers in relation to seeking final interdictory relief in a strike marred with unlawful conduct.

Strikes in SA have an unsettling history, where changes to interdict requirements can cause panic. Our courts have been inundated with urgent applications by employers to interdict strike action marred by unlawful and often criminal acts.

Recently, the Constitutional Court (court) in Commercial Stevedoring Agricultural and Allied Workers Union and Others v Oak Valley Estates (Pty) Ltd and Another (CCT 301/20) [2022] ZACC 7 had to determine whether an employer who is faced with unlawful conduct during a protected strike can obtain a final interdict against employees participating in strike action.

The focus is whether this can be done without linking each employee to the unlawful conduct.

On May 6 2019, a protected strike was called by the Commercial, Stevedoring, Agricultural and Allied Workers Union (CSAAWU). Before the commencement of the strike, the CCMA determined picketing rules and the commissioner noted that prior strike action at Oak Valley had resulted in violence and damage to property.

As expected, the strike was marred with unlawful conduct.

Oak Valley sought an undertaking from CSAAWU that its members would, inter alia, comply with the picketing rules and cease with all unlawful conduct. No undertaking was provided by CSAAWU and it contended that the unrest was out of its control, as it was caused by the local communities.

Consequently, Oak Valley approached the labour court and sought a rule nisi interdicting the respondents (CSAAWU, 364 employees as the “individual respondents” and “unidentifiable respondents” being nonemployees) from, among other things, unlawfully interfering with its operations.

Oak Valley insisted that an interdict against the individual respondents only would have no practical effect

unless the unidentifiable respondents were also interdicted. The court granted interim relief against CSAAWU, the individual respondents and the unidentifiable respondents.

Consequently, some of the individual respondents returned to work. On the return date for final relief, Oak Valley sought relief only against CSAAWU, the individual respondents who remained on strike and the unidentifiable respondents.

Oak Valley, however, abandoned the relief it sought against the unidentifiable respondents.

CSAAWU raised three defences at court. For purposes of this case note, we focus on CSAAWU’s allegation that Oak Valley had failed to link any of the cited individual respondents to the unlawful conduct.

The court granted the final interdict against the individual respondents on the basis that Oak Valley’s failure to identify the individual respondents in relation to the unlawful conduct did not render the interdictory relief sought incompetent.

On appeal, the labour appeal court accepted that Oak Valley was able to name certain individuals who participated in the unlawful conduct with a further group of unnamed, but clearly identifiable individuals, and if the conduct was not interdicted, it would continue.

Accordingly, the appeal court held that it would be cumbersome to require an employer to specifically name employees it seeks interdictory relief against.

The Constitutional Court

THERE MUST BE SOME LINK BETWEEN THE RESPONDENT/S AND THE ALLEGED ACTUAL OR THREATENED INJURY was asked to determine whether a final interdict ought to have been granted against CSAAWU and the remaining individual respondents. CSAAWU contended that interdictory relief will only be competent if a rational factual connection can be drawn between the alleged unlawful conduct and the individual respondents.

Notably, there was no dispute that the unlawful conduct took place; the main

/123RF — ILIXE48 contention was that Oak Valley failed to establish that the unlawful conduct could be linked to the individual respondents. Absent proving this link, CSAAWU contended that granting relief would be a violation of settled law on the requirements for a final interdict.

It is trite that to obtain interim relief, an applicant must show a prima facie right, a well-grounded apprehension of irreparable harm, no other satisfactory relief and that the balance of convenience favours granting interim relief.

The Constitutional Court confirmed that for an applicant to succeed in obtaining a final interdict, an applicant must show a clear right, an injury actually committed or reasonably apprehended, and that there is no other competent remedy.

The test in seeking interim interdictory relief is less than that of a final interdictory relief.

The court distinguished between identification by name and drawing a link between the respondents and the unlawful conduct. This case dealt with the latter. The court accepted there must be some link between the respondent/s and the alleged actual or threatened injury.

Ultimately the court made the following findings: ● For interdictory relief to be granted, mere participation in strike action in which there is unlawful conduct is not sufficient to link a respondent to the unlawful conduct. ● The necessary link can be

established where the strikers commit the impugned unlawful conducted as cohesive group.

The court found that if mere participation in a strike or protest carries with it a risk of being interdicted, this may deter lawful strikes and protest action and innocent participants in strike action would find themselves as subjects of an interdict and suffer prejudice.

This, the court found, may result in a chilling effect on the exercise of the constitutional right to strike. The court stated, however, that whether the necessary link has been established will be based on the particular facts of each case.

Clarity on link to unlawful strike conduct In this case in the Constitutional Court, the court provided good indications on when the necessary link to unlawful conduct in strike action can be established.

Where the unlawful conduct during protest or strike action is ongoing, widespread and manifest, individual strikers or protests will have to disassociate themselves from the unlawful conduct in order to escape the inference that it is reasonably apprehended that they would cause harm to the applicant.

Where a protest action is substantially peaceful but there are isolated instances of unlawful conduct, it is only those protesters or strikers who associate themselves with the unlawful conduct that can be placed under

interdict.

The court cautioned that the requirement does not mean that an employer must lead direct evidence that establishes conclusively that an employee was responsible for specific unlawful conduct.

The employer's onus may be discharged if the employer puts up facts from which an inference can be drawn on a balance of probabilities that

THE IDENTITY OF THE EMPLOYEES, AS WELL AS THEIR CONDUCT, MUST BE FULLY RECORDED TO THE EXTENT POSSIBLE an employee engaged or associated themselves with the unlawful conduct.

Impact of judgment on employers The effect of this judgment is that an employer cannot seek final interdictory relief against unnamed or unidentifiable employees during a strike action.

Accordingly, employers have a more onerous duty to ensure that they sufficiently link the respondent/s to the unlawful conduct and an extra effort needs to be made to identify the striking employees. For this to materialise, employers must be able to associate the striking employees with the unlawful conduct perpetuated during

the strike action.

Employers should keep a record of the strike action from the commencement of the strike. This can be done by using perimeter cameras, drones and other digital devices to video record and photograph the strike action.

The identity of the employees, as well as their conduct, must be fully recorded to the extent possible. In addition, a management official or security personnel should be tasked with keeping and taking custody of a strike diary that records the unlawful conduct, the identified perpetrators and their specific conduct.

The video footage, photographs and contents of the strike diary should form part of the founding papers.

The averments relied upon by the employer to associate employees to the unlawful conduct should be clearly set out in the founding papers, evidence should be made available to the court and confirmatory affidavits should accompany the founding affidavit.

Lastly, and importantly, employers may use the content of the strike diary to take disciplinary action against the identifiable perpetrators.

It is imperative employers obtain proper legal advice at the commencement of the strike action to ensure that they are able to cover all legal aspects to prepare for urgent legal proceedings and instituting disciplinary action against the identifiable striking employees committing the unlawful conduct.

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BusinessDay www.businessday.co.za April 2022

BUSINESS LAW & TAX

Court confirms invalidity of BEE criteria

BY THE BOOK

Judges say finance minister exceeded his powers •relative to preferential procurement rules Pieter Steyn Werksmans

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n September 2020, the Supreme Court of Appeal (SCA) declared that the preferential procurement regulations issued by the finance minister in 2017 were invalid.

The finance minister appealed against this decision to the Constitutional Court which upheld the SCA’s decision in a judgment handed down on February 16 2022.

The regulations were issued in terms of the Preferential Procurement Policy Framework Act and allowed governmental, parastatal and state-owned entities to disqualify tenderers upfront (without first considering their tender price and other conditions) if they did not comply with the following prequalification criteria set out in the regulations: ● Having a stipulated minimum BBBEE rating; ● Being an exempted microenterprise (EME) or qualifying small enterprise (QSE).

An EME is a firm with annual revenue of R10m or less and a QSE is a firm with annual revenue of between R10m and R50m; and ● Subcontracting at least 30% of the tender to an EME or QSE which is at least 51% owned by black people, black

youth, black women, black people with disabilities, black people living in rural or underdeveloped areas or townships or black people who are military veterans.

The act provides that tenders must first be assessed in terms of a preference point system where price is the dominant basis on which procurement decisions must be made. The act provides that at least 80 out of 100 points must be allocated based on price for tenders from R30,000 up to R50m and at least 90 out of 100

THE COURT FOCUSED ON WHETHER THE MINISTER HAD THE POWER TO ISSUE PREQUALIFICATION CRITERIA IN THE REGULATIONS points must be allocated based on price for tenders over R50m. The remaining points may take non-price considerations such as BBBEE into account. As the 90:10 and 80:20 split is a statutory requirement, there can be no deviation from it unless the act is amended by parliament.

The SCA found that the pre-qualification criteria in the regulations deviated from section 217(1) of the Constitution which requires organs of state and “institutions identified in national legislation” to procure goods or services in accordance with a “system which is fair, equitable, transparent, competitive and cost effective”. The regulations did not create a framework for the application of the prequalification criteria and this could lend itself to abuse.

The minister’s decision to allow prequalification criteria also contradicted and deviated from the 90:10 and 80:20 split set out in the act and he had accordingly exceeded his powers.

Because of the interconnectedness of the regulations, the SCA declared the regulations invalid in their entirety (and not just the portion of the regulations dealing with prequalification criteria). However, this order was sus pended for 12 months from the date of the order (September 8 2020) to allow the finance minister time to remedy the defects.

The Constitutional Court focused on the narrow issue of whether the minister had the power to issue prequalification criteria in the regulations. The act provides that the minister may issue regu-

/123RF — OLIVIER26 lations “regarding any matter that may be necessary or expedient to prescribe in order to achieve the objectives of the act”. A five-judge majority found the minister had exceeded his powers. A four-judge minority, however, disagreed. The court unfortunately did not deal with the key issue of whether or not prequalification criteria in state tenders complied with the requirements of section 217(1) of the Constitution (this issue formed the basis for the SCA decision).

The Constitutional Court and SCA decisions have implications especially as procurement by governmental, parastatal and stateowned entities totals about R2-trillion annually. The SCA suspended its declaration of invalidity for 12 months but such 12-month period has expired. Any state tenders which involve prequalification criteria are open to challenge. The invalidity of the regulations in their entirety causes serious uncertainty

and it is hoped the minister will urgently take steps to rectify the situation.

The laws governing public procurement are currently being reviewed and a draft Public Procurement Bill has been published which would repeal the Preferential Procurement Policy Framework Act. The bill does not repeat the statutory 90:10 and 80:20 requirements in the act. It provides for the finance minister to prescribe a framework for preferential treatment and procurement which must “consider” the Broad-Based Black Economic Empowerment Act and include a preference point system and applicable thresholds and “measures for

THE LAWS GOVERNING PUBLIC PROCUREMENT ARE BEING REVIEWED AND A DRAFT BILL HAS BEEN PUBLISHED

preference to set aside the allocation of contracts” to promote a category or categories of persons or businesses or a sector, SA manufactured goods, local technology, services by SA citizens, job creation and enterprises in townships, rural or undeveloped areas or in a particular province or municipality.

The bill has, however, not yet been passed by parliament and the final act and any framework subsequently issued by the finance minister would still be subject to the section 217(1) Constitutional requirements for public procurement, namely that the system must be “fair, equitable, transparent, competitive and cost effective”.

Although section 217(2) of the Constitution states that section 217(1) does not prevent a preferential procurement policy for state tenders, the section 217(1) requirements must be taken into account and a balance will have to be maintained in any future laws and regulations.

What Icasa draft rules mean for licensees

By ENSafrica On March 16, the Independent Communications Authority of SA (Icasa) published draft regulations containing amendments which, if implemented, will have a dire effect on licensees, especially M&A, restructure or other transactions that result in a change in shareholding.

The stated purpose of the draft regulations regarding standard terms and conditions for individual licences under chapter 3 of the Electronic Communications Act, 2005 is to provide further clarity regarding Icasa’s standard terms with respect to

individual licences and to enhance compliance, and to streamline the submission of documents to Icasa. The draft regulations will impact individual broadcasting and ECS/ECNS licences.

Most importantly, the draft regulations intend to repeal the requirement for a licensee to notify Icasa of changes in its shareholding and replace it with a requirement to obtain their prior approval.

Icasa motivates this change by stating: “It has been noted that the notification process is susceptible to abuse or being incorrectly applied to the extent that it

alters or changes ownership.

Through a notification the authority is unable to sufficiently monitor and manage the change in shareholding specifically to the extent that it changes ownership and control over time. shareholding “Any changes have the effect of changing the shareholding structure of that entity, and such changes may conflict with the objectives and mandate of the authority as found in the Electronic Communications Act. Thus, the process of any changes in shareholding, will be subject to an approval by the authority and will be guided and prescribed

in terms of the process and procedure regulations for individual licences.” [our emphasis added].

This amendment, will require all licensees to obtain Icasa’s approval for any changes in their shareholding (no matter how small).

The process to obtain this approval is not set out in the draft regulations, so it is unclear how it will work and what fee would need to be paid. It is also not clear if a similar process would need to be followed as is currently required for the approval for change of control applications (which is a costly and lengthy process, which can

take anything from six to 18 months). Icasa states that the process will be prescribed in the process and procedure regulations. Icasa has not yet published amendments to the current process and procedure regulations detailing the above.

The draft regulations intend to extend the time period for notification of a change in licensee details and information from seven to 14 days.

Regulation 9 requires licensees to notify Icasa five days prior to the provision of services (and, seemingly, prior to the amendment or termination of services) of:

● The name of the new product/service, amendment, or termination being notified to Icasa; ● The objective and reason(s) of launching a new product/ service, amendment or termination of a product/ service; ● The effective date of the new product/service, amendment or termination of a product/service; and ● The price(s) and all other fees applicable to the product/service.

Written comments and representations on the draft regulations must be submitted to Icasa by 4pm on May 5 2022.

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BusinessDay www.businessday.co.za April 2022

BUSINESS LAW & TAX

Spotlight is on competition

on the concentration of economic activity •is Policy poised to be a key driver of reform Lerisha Naidu, Angelo Tzarevski & Sphesihle Nxumalo Baker McKenzie

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n March 2022, the Competition Commission briefed parliament’s portfolio committee on trade & industry on its Economic Concentration Report.

The report was released in late 2021 and highlights patterns of concentration and participation in the SA economy. It includes details on the commission’s power to launch market inquiries into highly concentrated industries and its increased authority to impose structural remedies on businesses in these sectors.

Such remedies are deemed necessary to remove barriers to entry for new participants, primarily for small and mid-size enterprises (SMEs) and firms owned or controlled by historically disadvantaged persons.

It has been widely recognised that SA’s markets and ownership structures are excessively concentrated, owing primarily to the legacy of historical disadvantage.

SA’s constitutional mandate prioritised the abolition of racialised economic structures, which was a glaring feature of the previous political dispensation. A more robust system of regulating competition was formulated as a lever to advance the broader process of economic transformation.

The democratic government made competition regulation its preferred method of regulating private enter-

prises in the public benefit to, among other things, foster an inclusive economy.

This is the context out of which the commission sought to conduct an initial study on concentration levels in the economy. The initial study found that certain industries in SA, including ICT, energy, financial services, food and agroprocessing, infrastructure and construction, intermediate industrial products, mining, pharmaceuticals and transport, were highly concentrated.

The commission used market share estimates in these industries as a proxy to inform its assessment of the structural conditions.

IN FACT, THE FINDINGS OF THE REPORT ARE EXPECTED TO SERVE AS A BASIS FOR A BROADER SET OF RECOMMENDATIONS The report builds on the commission’s preliminary research into structural conditions in various sectors. For example, the report states the top three firms generate 50% of wind and solar power, and the top three refineries and liquefied petroleum gas suppliers have a market share of more than 65%.

The report highlights the shift in emphasis from simply protecting competition and market participation to more actively promoting improvements in competition, reduc-

ing concentration in the economy and actively promoting broader participation and a spread of ownership.

It has become trite that the mandate of the SA antitrust authority is dual in nature. It has always been the case that the commission’s remit transcends pure competition issues into the realm of the public interest, including economic transformation.

It is in this context that amendments were effected into the Competition Act in 2019, seeking to ensure the achievement of economic transformation.

These amendments strive to do so through addressing high levels of concentration, enhancing small business development and tackling the “racially skewed” spread of ownership through merger control, the imposition of structural remedies, the prosecution of abuses of dominance as well as, pertinently, market inquiries.

Specifically, and in relation to market inquiries, the amendments lower the threshold for intervention by the competition authorities by establishing an “adverse effects” test. In other words, the competition authorities will be able to conduct a market inquiry if any feature or combination of features in a market adversely affects competition in that market, even if that impact is not substantial.

After a market inquiry, the commission may take any action (including imposing structural remedies such as divestitures) to remedy, mitigate or prevent an alleged adverse effect on competition

MARKET SHARE

/123RF — ELXENEIZE and make a recommendation to the Competition Tribunal for the tribunal to make an appropriate order in relation to such adverse effect on competition.

Furthermore, on completing a market inquiry, the commission can furnish recommendations for a change of policy, legislation and regulations to the trade, industry & competition minister, as well as recommendations to other regulatory authorities in respect of competition issues. In fact, the findings of the report are expected to serve as a basis for a broader set of recommendations for the government to address deep-seated structural issues related to persistent concentration, a lack of participation and ownership transformation.

The government’s intervention is deemed necessary as most sectors are directly influenced by the government through legislation,

regulation, licensing, and procurement, among other things. These levers are considered to have an impact on market structure.

Certainly, it appears there are a series of government initiatives aimed at enhancing the economic trajectory of the country, which may be bolstered by the commission’s recommendations or active role in policy formulation. Inclusive economic growth appears to be at the top of the government's agenda, reiterating the farreaching economic reform measures outlined in the Treasury’s 2019 economic

IT APPEARS THERE ARE A SERIES OF GOVERNMENT INITIATIVES AIMED AT ENHANCING THE ECONOMIC TRAJECTORY OF SA

policy paper, aimed at economic transformation, inclusive growth and increased competitiveness.

Competition policy is certainly poised to be a key driver of economic reform, with the economic inclusion of SMEs and firms owned or controlled by historically disadvantaged persons speaking to one of the primary objectives of the Competition Act, which is to provide an opportunity for all South Africans to participate fairly in the national economy.

With an alignment of objectives, the competition authorities are expected to play an integral role in the government’s drive for greater economic inclusion.

The commission understands what is at stake, with commissioner Tembinkosi Bonakele having pointed out that inclusivity is not just a social imperative but also a platform for more competitive and dynamic markets, greater economic growth and increased employment.

The amendments will empower the authority to “deconcentrate” what it considers to be highly concentrated markets. The commission will enjoy more power to launch market inquiries into sectors it considers to be highly concentrated, with increased authority to impose structural remedies on businesses in these sectors if they are found to create barriers to entry.

Moreover, the commission’s findings following a market inquiry will be binding unless they are challenged in the tribunal. Businesses operating in highly concentrated sectors, especially those identified by the competition authorities, should prepare to be under a more intense spotlight.

Disruption leads to malcontent’s dismissal Jacques van Wyk Werksmans The Commission for Conciliation, Mediation and Arbitration (CCMA) considered whether the dismissal of an employee who kept raising grievances was substantively and procedurally fair in the case of Chemical, Energy, Paper, Printing, Wood and Allied Workers’ Union obo Mokoena/Sasol Chemical Operations (Pty) Ltd [2022] BALR 105 (NBCC I).

This case arose from ther alleged unfair dismissal for reasons of incompatibility.

The employee lodged “endless complaints” and displaying aggression continuously

to his immediate superiors.

The employee said that his complaints arose from disagreement with the poor work performance his employer gave him.

The dismissal of an employee who kept raising employment grievances which were often unfounded or had been resolved on previous occasions was considered to be substantively and procedurally fair.

The employee had indicated he had financial problems and family problems which affected his mental focus and concentration at work due to stress. He was assisted through the process of the Independent Coun-

selling and Advisory Services (Icas) and it was established that he was fit to perform his work. The employer assisted the employee who later continuously rejected advice and persistently raised issues that had previously been dealt with.

The commissioner noted that the evidence showed the employer went out of their way to assist the applicant.

Despite the efforts of the employer, poor work performance persisted which had resulted in the low performance rating afforded to the employee.

Thereafter, the commissioner noted that the employee had continued to file

grievances after a successful conciliation meeting in which he had agreed to “bury old wounds”. Ultimately, the relationship between the employee, his co-workers and superiors grew toxic. The employee continued to fail to follow instructions and displayed aggression.

Incompatibility had been incorporated in the employer’s disciplinary policy as a form of misconduct. The employee denied he was aware of the provisions in the employer’s disciplinary code making incompatibility a disciplinary offence.

This was rebutted by evidence provided by the employer which had been

affirmed by the commissioner. The commissioner relied on the case of Jabari v Telkom SA (Pty) Ltd [2006] 10 BLLR 924 (LC), in which the Labour Court highlighted important characteristics in explaining the nature of workplace incompatibility. It said that: “…incompatibility refers to the employee’s inability or failure to maintain cordial and harmonious relationships with his peers, incompatibility is a form of incapacity and incompatibility is an ‘amorphous nebulous concept’ based on subjective value judgments”.

The commissioner found the employee had disrupted the harmony of the work-

place, warranting dismissal.

He had been counselled but had refused to co-operate with remedial measures or to sign minutes. The termination of his employment was the last resort since the employer had invested a lot of time to consider his grievances which were unfounded and baseless.

The notion of incompatibility is nebulous but, when proven, can serve as a valid basis for dismissal. An example of this is when an employee lodges continuous grievances which are unfounded or have been resolved on a previous occasion which disrupt the harmony in the workplace.

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BusinessDay www.businessday.co.za April 2022

BUSINESS LAW & TAX

Partnerships can unleash AfCFTA goals

TIME FOR TRADE

is an urgent imperative to address •theThere infrastructure funding gaps on the continent Michael Foundethakis Baker McKenzie

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frica needs strong partnerships to address its development challenges and to ensure it is able to take full advantage of the African Continental Free Trade Area (AfCFTA).

For free trade across the continent to be successful, infrastructure is needed to facilitate the movement of goods and services across Africa’s borders. There is an urgent imperative to address the infrastructure funding gaps in transportation, energy provision, internet access and data services, education and healthcare infrastructure projects on the continent.

Major players in Africa’s infrastructure funding include China. To aid Africa with its huge infrastructure needs, China has provided capital for key infrastructure projects in Africa in the past few years.

A Baker McKenzie report with IJ Global-New Dynamics, Shifting Patterns in Africa’s Infrastructure Fund-

ing shows that lending by Chinese banks into energy and infrastructure projects in sub-Saharan Africa saw a small uplift in 2020, despite the pandemic, although deal values were well below their 2017 peak.

In 2017, Chinese banks lent $11bn to African infrastructure projects, which decreased to $4.5bn in 2018, $2.8bn in 2019 and $3.3bn in

CHINA HAS PROVIDED CAPITAL FOR KEY INFRASTRUCTURE PROJECTS IN AFRICA IN THE PAST FEW YEARS 2020. Overall, the figures reveal that there has been a slowdown in the number of infrastructure deals backed

by Chinese investors, though they are by far still the biggest investors in the region. In the short term, the report notes that more targeted lending from China is expected.

Meanwhile, the US has

also renewed its focus on impact-building and financing strategic long-term projects in Africa, with the Export-Import Bank of the United States (Exim) supporting infrastructure development on the continent.

In 2021, the US announced a renewed Prosper Africa initiative, which focuses on improving reciprocal trade and investment between the two regions.

The US is a major player in funding African infrastructure projects.

For example, according to the infrastructure report, two US development agencies — Exim and the Overseas Private Investment Corporation — funded infrastructure projects to the value of $4.7bn and $3.6bn respectively, between 2008 and 2020.

Furthermore, in early 2020, the European Commission published its Comprehensive Strategy with Africa, outlining the region’s plans for its new, stronger relationship with the continent. The strategy document laid out five top priorities for the EU in Africa — the green transition and improving

/123RF — AKE1150 access to energy, digital transformation, sustainable growth and jobs, peace and governance, and migration and mobility.

According to the European Commission, the EU, its member states and the European development finance institutions, together known as Team Europe, are Africa’s top partners. In 2018, the EU had about €239bn in foreign direct investment stock in Africa. Team Europe is also the largest provider of official development assistance (ODA) in Africa.

In 2018-2019, it provided

THE UK IS MAKING A STRONG PLAY FOR INFLUENCE, INVESTMENT AND TRADE WITH AFRICA, POSTBREXIT

€17bn of ODA to the African private sector and €5bn to large infrastructure projects.

In the same timeframe, the European Fund for Sustainable Development leveraged more than €24bn in private funds, and the European public development banks jointly invested more than €30bn on the African continent. One of the aims of Team Europe has been to assist the continent with its pandemic recovery by investing in resilient health care systems and local vaccine production.

A recent transaction that shows the breadth of the partnership between Europe, the US and Africa is the finalisation of a joint financing package from the IFC, the French development institution Proparco, the German development finance institution (DEG) and the US International Development Finance Corporation (DFC) for Aspen Pharmacare Hold-

ings and certain of its subsidiaries (Aspen Group) in the amount of €600m. Baker McKenzie advised the Aspen Group on this transaction.

The financing package came as governments across the region called on the international community to assist in bolstering the continent’s vaccine supply chain. The IFC has noted that this transaction is the largest investment and mobilisation in the health care sector the organisation has led globally to date.

The SA-headquartered pharmaceutical company is playing a leading role in producing Covid-19 vaccine treatments and therapies for use across Africa.

The UK is also making a strong play for influence, investment and trade with Africa, post-Brexit.

Further to key summits in 2020 and 2021, finance is being redirected into Africa from the UK.

CONSUMER BILLS

The rights and wrongs of criticising our judges

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o-one, not even the judges, suggest that judges are beyond criticism. Like everyone else, judges may be the object of other people’s constitutional right to freedom of expression.

Judges criticise other judges. When matters go on appeal through the hierarchy of courts, the appeal court will frequently criticise the reasoning of judges in the court below, sometimes in trenchant terms telling them how they got it wrong.

But human rights are of no use unless there is a way of enforcing them. The courts play the most important role in enforcing the constitution.

The courts ensure that all laws and conduct are consistent with the constitution and have been

PATRICK BRACHER described as the last line of defence for citizens in a constitutional democracy.

The trouble is that most people are bad losers. When they lose in court (and someone usually does), or when the court makes a finding contrary to someone’s strongly held views, criticism flows freely. In this world filled with social media, the means of criticism is boundless.

In the early days of the Constitutional Court the

impartiality of some of the judges was questioned. The court pointed out that deep below consciousness are other forces, likes and dislikes, predilections and prejudices, complex instincts and emotions, habits and convictions, which make up a person whether they be litigant or judge.

The judge does not sit in a vacuum. We rely on a presumption of judicial impartiality unless someone can prove otherwise. The Constitutional Court has pointed out that, if it were open to litigants to request the recusal of every judicial officer whose world view and beliefs differ from their own, the work of the courts would be entirely suspended.

The courts would spend most of their time processing

recusal applications and battling with the Sisyphean task of finding judges who would not be disqualified on account of their opinions or religious or other personal affiliations.

In a multicultural, multilingual and multiracial society such as SA it cannot reasonably be expected that judicial officers should share all the views or even the prejudices of those persons who appear before them.

When we criticise judges and their judgments, the criticism should pass the test for a recusal application based on an allegation of bias. It must be based on evidence that rebuts the assumption that judges are individuals of careful conscience and intellectual discipline.

It is presumed that judges are capable of applying their minds to the multiplicity of cases which will seize them during their term of office without importing their own views or attempting to achieve ends justified in feebleness by their own personal opinions, said the Constitutional Court recently.

Allegations of bias rely on proving a reasonable apprehension that the judge is was biased and did not

COURT DECISIONS ARE TESTED ON APPEAL AND TESTED AGAINST THE MEASURES PROVIDED

BY ROBUST PUBLIC SCRUTINY

bring an impartial mind to bear on the issues in dispute.

The test is objective, not the subjective bias of the critics.

If there is real evidence of deliberate bias or capture of a judge it must be revealed but we must not assume improper motives just because we don’t agree with the judgment.

All this is self-evidently important. Court decisions are tested on appeal and tested against the measures provided by robust public scrutiny.

But if we cross the line into personal insult, we are doing ourselves as much as everyone else a gross disservice. ● Patrick Bracher (@PBracher1) is a director at Norton Rose Fulbright.

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BusinessDay www.businessday.co.za April 2022

BUSINESS LAW & TAX

Vaccines: follow the procedures

TO VAX OR NOT TO VAX

Covid-19 vaccination-related dismissals must be •carefully handled or risk being declared unfair Jonathan Goldberg & Grant Wilkinson Global Business Solutions

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n the award between Dale Dreyden and Duncan Korabie Attorneys it is shown that when dismissing an employee because they don’t want to have a Covid-19 vaccine you still need to follow proper procedure.

If you don’t you risk the dismissal being declared substantively unfair, procedurally unfair or both.

The applicant was an articled clerk who was employed by the respondent’s firm of attorneys. He was dismissed as he refused to be vaccinated against Covid-19 even though his principal, who is the owner of the firm, had serious comorbidities.

The articled clerk was appointed in 2018. The letter of appointment stated the applicant would be employed as long as the contract of articles is available. In 2021, the applicant’s employment was terminated without notice.

The reason for the termination was as a refusal to be vaccinated. The applicant brought the matter before the CCMA on the grounds of dismissal based on conduct or

discover more

incapacity.

The firm had suffered cyberattacks and break-ins at its premises. Owing to this, extra security measures were instituted. However, during the Covid-19 period these extra security measures prevented employees from working from home.

Owing to the principal’s comorbidities he instituted a mandatory vaccination policy based on appropriate risk assessment guidelines. The

IF YOU DON’T FOLLOW THE CORRECT PROCEDURE IT IS LIKELY YOU WILL FACE A NEGATIVE OUTCOME AT CCMA reason the applicant forwarded the refusal to have a vaccine was that he had found evidence on social media which supported his decision not to vaccinate.

When vaccines became available for the age groups the employees fell into, the principal sent out a message to the firm’s WhatsApp group saying that they needed to provide proof they had

received a vaccination or that they had booked to have a Covid-19 vaccination. If they did not provide this within five days they would be dismissed. The applicant replied saying that he would not be receiving a vaccination. After this he was dismissed without notice.

The commissioners ruled that the applicant’s dismissal was substantively fair but procedurally unfair. The applicant was awarded four weeks of notice pay as well as one month’s pay.

COURT SETS PRECEDENT

This award shows that even though dismissals, based on a refusal to vaccinate, are possible subject to the grounds of fairness and considerations of the various directives and applicable legislation, if you don’t follow the correct procedure it is likely you will face a negative outcome at the CCMA. While the various cases decided so far at the CCMA have given a clear indicator on the direction employers should take in respect of vaccinations, there had not been a precedent set until the Labour Court case of Solidarity v Hudaco Trading (Pty) Ltd (J49/2022).

In this matter, the appli-

/123RF — SSILVA cants sought an order declaring the respondent’s admission policy is unlawful and in breach of the employee’s contract of employment. The action was instituted after a letter was issued wherein the respondent indicated, among other things, it had performed an overall risk analysis and is formalising its policy that it would adopt effective from January 10 2022. The employee subsequently informed the employer she is unwilling to receive the Covid-19 vaccination and was willing to undergo weekly Covid-19 tests at the employer’s expense.

The employer had indicated it would not pay for the Covid-19 test and that she would therefore not be allowed on the premises.

Several engagements with the union and communications to employees then followed leading into the litigation process.

The case before the court was whether the employer was in breach of the employee’s contract of employment.

The lawfulness attack on the admission policy was firstly based on the contract of employment and secondly is

based on the direction and/or the Occupational Health and Safety Act. With regards to the earlier, the court found that the applicants were unable to point to any specific term of the contract that was breached because of or by the adoption of the admission policy. Further there was no provision of the contract of employment that needed to be restored as the employee’s contract had not been changed.

Pursuant to setting out an exposition of the law related to the latter ground (ie direction and/or the Occupational Health and Safety Act ) the court found that it is unable to find the admission policy constituted a mandatory vaccination policy. The provisions relied on by the applicants were therefore not applicable and were of no relevance to the matter because the respondent’s admission policy is not a mandatory vaccination policy. The court went further to find that the admissions policy is not and cannot be in breach of the direction and the Occupational Health and Safety Act and the respondent employer had in fact acted in

compliance with the act and the direction in it duty to provide and maintain, as far as is reasonably practicable, a working environment that is safe and without risk to its employees’ health.

The case was dismissed.

The government strengthened and clarified the position for employers when it gazetted the Code of Good Practice: Managing Exposure to Sars-Cov-2 in the Workplace. The code requires that “every employer must take measures to determine the vaccination status of workers”. Additionally, employers are empowered to require employees “to produce a vaccination certificate”.

Whereas the previous directions mentioned constitutional grounds as a right to refuse vaccination, the new code makes no mention of bodily integrity or right to freedom of religion, belief and opinion.

The government has indicated it will in due course issue occupational health and safety regulations to supplement the code. This matter is constantly developing and no doubt will continue to do so for the foreseeable future.