The Year to Come and Year in Review summarise a selection of major developments you should be aware of from 2021, and a selection of key developments expected in 2022.
Key updates to
43
pieces of legislation in 2021 and 2022
“Secure energy supply is critical for growth in SA. It will be critical that government continue to focus on securing energy supply but also to transform the energy sector.”
Jason van der Poel, Partner, Webber Wentzel
Competition and Antitrust: Public interest will play a paramount role in merger assessments – especially conditions aimed at increasing ownership levels of historically disadvantaged persons and workers, and increasing participation of small and medium businesses in markets.
Following the Constitutional Court's recent decision in Mediclinic, the scope of public interest considerations may be broadened to include constitutional issues.
Comprehensive recommendations will be published in the Online Intermediation Platforms Market Inquiry (OIPMI) and more market inquiries may be launched in highly concentrated industries.
Agribusiness, food and beverage: This sector will need to respond to 2021 Extended Producer Responsibility Regulations.
Broad-Based Black Economic Empowerment (B-BBEE): A panel is expected to be appointed to report on ways to address critical issues related to B-BBEE to ensure the appropriate changes are effected to minimise exploitation of the B-BBEE provisions and to ensure that broad-black ownership strengthens transformation of the economy.
Procurement: A Public Procurement Bill may be tabled in Parliament during 2022 and will simplify the rules regulating the public tender process.
Listed companies: The Johannesburg Stock Exchange (JSE) will be increasingly active in ESG matters relevant to listed companies.
The revised code for Responsible Investing in SA may be finalised and will focus on ESG issues at institutional investors board level. The Companies Amendment Bill also focuses on ESG topics such as access to information for shareholders and third parties, voting on remunerations reports and policies, disclosure of pay gaps and new requirements for social and ethics committees and members.
Following the release of sustainability and climate change disclosure guidance by the JSE in late 2021, listed companies are expected to become increasingly focused on these issues as they interpret and apply the recommended disclosures and metrices in their reporting processes.
Company: We expect a revised draft of the Companies Amendment Bill to be published and tabled in Parliament early next year. The revised amendments may come into force early 2022.
Data protection and information management: Data breaches are likely to continue in 2022 given the ongoing Covid-19 pandemic and the resultant global shift to a digital/hybrid environment. Increased data protection enforcement by the Information Regulator is likely, aided by streamlined internal processes in the office of the Information Regulator and technological developments (such as an automated complaints management system).
The Information Regulator will publish more guidance and case law related to the Protection of Personal Information Act (POPIA) will be developed to help with interpretation. Organisations that are required to obtain prior authorisation to process certain categories of personal information will need to obtain this by 1 February 2022.
All or part of the Cybercrimes Act will become operational in 2022.
Disputes and arbitration: We may see an increase in ESG related litigation and the use of arbitration to settle disputes. We are also likely to see an increase in damages claims following data breaches.
Workplace: Employers will continue to deal with the question of introducing mandatory vaccination policies. This involves complex issues including: the use of different policies for different employees; claims of unfair discrimination by unvaccinated employees; and employer rights when it comes to employees who refuse to be vaccinated.
A controversial Employment Equity Amendment Bill – which aims to set employment equity targets in the private sector – may be introduced in 2022.
Energy: The Government will focus on securing energy supply, transforming the sector and preparing a climate change response to achieve the just transition. The Government has set out some of its priorities over the next 24 months which are likely to affect every sector.
SA's national regulator, Eskom, will take steps towards unbundling.
Infrastructure: Following the Infrastructure Development Act and the establishment of the ZAR100 billion Infrastructure Fund, there will be several major infrastructure projects and strategic integrated projects announced in 2022.
Environment: ESG issues have become a strategic priority across most industries. There is a growing impetus for businesses to align with common ESG standards and metrics for sustainability related disclosures and reporting.
A new financial provisioning regime is expected to commence once the replacement NEMA Financial Provisioning Regulations are finalised. The scope of the Extended Producer Responsibility framework may be extended to include a broader number of sectors, in order to further the development of a circular economy. Also, a draft Climate Change Bill should make its way through Parliament which aims to formulise SA's carbon budget market.
Financial services: A Conduct of Financial Institutions (CoFI) Bill may be submitted to Parliament in 2022 as part of the twin peaks model to reform the sector. The CoFI Bill, which focuses on the treatment of customers, will replace existing provisions in the financial sector laws and aims to build an effective market conduct legislative framework for all institutions carrying out financial activities.
Amendments proposed in 2021 to the Financial Intelligence Centre Act (FICA) may gain some traction in 2022.
Fintech: Fintech policies are expected in SA and will include crypto assets. The regulators will also need to address the aggressive market growth and social benefit that the industry provides. Much social and economic development results from open finance and digital banking, both of which are expected to increase in 2022 and should be included in the regulatory framework. It is expected that the regulators will respond to the Financial Sector Conduct Authority's recommendation to introduce standardised open finance policies.
Infrastructure: Following the Infrastructure Development Act and the establishment of the ZAR100 billion Infrastructure Fund, there will be several major infrastructure projects and strategic integrated projects announced in 2022.
Transport: A Transport Bill which seeks to consolidate the financial regulation of transport into a single framework and policy, and to establish a Transport Economic Regulator may gain momentum in 2022.
Intellectual property: A controversial Copyright Amendment Bill and Performers' Protection Amendment Bill may gain momentum in 2022. There may also be clarity regarding the content of two bills in limbo –the draft Patents Amendment Bill and the draft Designs Amendment Bill.
Mining: Global mining companies will continue to focus on internalising and embedding an integrated approach to ESG. An important 2021 High Court decision which ruled that the 2018 Mining Charter is policy, not law, and set aside various aspects of the Charter as unconstitutional will be challenged.
Private equity: We expect continued investment in infrastructure, energy, transport, healthcare, technology and financial inclusion.
Funding to support SMEs will gain momentum and so will impact investing.
Land and property: Land expropriation will remain a hot topic although it is unlikely that the Expropriation Bill will be passed.
Restructurings, business rescues and liquidations: Several financially distressed businesses may be restructured or liquidated. The restructuring of financially distressed SOEs will generate opportunities for private investment.
Tax: A 2021 proposal to tax retirement withdrawals where individuals emigrate has been deferred to 2022. Effective from 1 January 2022, South African (SA) companies may only return share capital ("contributed tax capital" for tax purposes) if all shareholders of the applicable shares class participate in a return of share capital.
The 2021 proposal to limit a taxpayer's ability to set off tax losses against taxable income has been deferred to a date to be promulgated.
Also, the 2021 amendment which proposes to limit a company's ability to deduct interest payable to persons not subject to SA tax has been deferred to a date to be promulgated. In terms of this amendment, interest deductions, on debts owing to persons who are not subject to SA tax, will be limited to 30% of the debtor's "adjusted taxable income" (essentially a tax calculation of EBITDA) as opposed to being a flexible, fluctuating limitation dependent on the SA repo rate.
From an international tax point of view, an amendment has been proposed to the "controlled foreign company" (CFC) anti-diversionary rules to the effect that, when a CFC purchases goods, those goods should be delivered within the CFC's country of residence. The way that the amendment is currently worded could negatively affect normal commercial transactions which are not necessarily intended to abuse the CFC rules.
In 2020, the CFC rules were amended to limit the application of the dividend exemption in loop structures. This limitation is based on a formula, which initially was drafted incorrectly. The formula has been corrected in the Taxation Laws Amendment Bill, with effect from inception. Accordingly, the correct formula will apply retrospectively from 1 January 2021, and be applicable in respect of dividends received by, or accrued to, any CFC after that date.
Telecoms, media and technology (TMT): Connectivity and digital access will continue to be key issues.
It remains to be seen whether the licensing of the International Mobile Telecommunications (IMT) spectrum and the Wireless Open Access Network (WOAN) will occur in 2022.
The Independent Communications Authority of South Africa (ICASA's) market inquiry into signal distribution services in SA is likely to continue into 2022.
Large/dominant players will be closely scrutinised. Ethical issues related to the regulation and use of AI will continue to be hot topics.
International trade: SA and other Member States will continue to work towards implementation of the African Continental Free Trade Agreement (AfCTA).
SA may also have some investment opportunities related to the African Growth and Opportunity Act.
Competition and Antitrust: Extensive amendments were proposed to merger filing forms – once finalised, merger parties will have to provide extensive information on the effect of the merger on the public interest considerations.
The Competition Commission published proposed amendments to its Small Merger guidelines which may expand the scope of notifiable mergers in digital markets.
The Commission prohibited the Burger King merger on public interest grounds.
The Commission also launched the OIPMI.
Broad-Based Black Economic Empowerment: A Practice Note was issued on the Rules for discretionary Collective Enterprises in the B-BBEE Act. It provides clarity on how ownership schemes and structures should be interpreted.
Listed companies: Section 9K of the Income Tax Act was introduced. It triggers a potential tax liability when dual listed shares are migrated from SA to an offshore stock exchange.
The JSE issued a letter providing that any shareholders' meeting required pursuant to the listing’s requirements of the JSE and/or the Financial Markets Act 2021 to remove a company's listing, cannot be called or take place during a prohibited period. The offer period also cannot be during a prohibited period.
The JSE proposed amendments to the Listings Requirements following a consultation on the Listing Regulations. These aim to cut red tape, achieve fit for purpose regulations and to clarify the requirements.
There was also an increased focus on ESG integration in the corporate decision-making process and a revised Code for Responsible Investment in South Africa (CRISA) was published. Public consultation on the draft was open until the end of January 2021.
The JSE published sustainability and climate change disclosure guidance for locally listed companies. The guidance aims to help listed companies navigate the rapidly evolving landscape of sustainability and climate reporting by providing guidelines specifically tailored to the South African context, while taking into account global best practice. While all entities are encouraged to use the guidelines, they do not constitute mandatory disclosure or reporting obligations under the JSE Listings Requirements.
Company: A new draft of the Companies Amendment Bill was published. Although the Bill clarifies many important company law issues; several ambiguities related to the Companies Act 2008 remain.
An important judgment upheld the rights of dissenting minority shareholders in situations where a company intends to repurchase more than 5% of its own shares. Given proposed amendments to the Companies Act, the interpretation issues raised in this judgment may become academic.
Data Protection & Information Management: Businesses and all public bodies in SA had to comply with the provisions of POPIA by 30 June 2021.
The Information Regulator published several clarity notes on practical aspects of POPIA. It also conducted various awareness initiatives. Draft POPIA Regulations were published for public comment.
Read more here, here, here and here…
The functions of the SA Human Rights Commission under the Promotion of Access to Information Act 2000 (PAIA) were transferred to the Information Regulator. New PAIA Regulations and an updated PAIA guide were published, as well as the Information Regulator's PAIA Manual.
All public and private bodies must compile a PAIA manual by 31 December 2021.
The President signed the Cybercrimes Bill which has yet to come into force.
Disputes and arbitration: On 1 June 2021, the Arbitration Foundation of Southern Africa's (AFSA's) new international arbitration rules came into effect. These rules will help grow SA's reputed position as an international arbitration seat.
AFSA also incorporated the appointment of an emergency arbitrator and emergency arbitration provision into its new international rules.
AFSA international – a branch of the Arbitration Foundation of Southern Africa – released its new rules, which require the disclosure of third party funding arrangements in the international arbitrations it administers.
Workplace: Employers grappled with issues related to mandatory vaccination policies in the workplace.
Employers also grappled with new obligations created by Personal Protection laws.
Mental health was a focus area for many employers.
The national minimum wage was increased.
A new earnings threshold under the Basic Conditions of Employment Act was published.
The Constitutional Court handed down a landmark judgment related to secondary strikes.
The High Court set aside guidelines issued by the Minister of Employment.
Energy: The Government struggled to ensure enough electricity. A further (fifth round) of renewables procurement under the Renewable Energy Independent Power Producer Procurement Programme was announced.
Schedule 2 of the Electricity Regulation Act was amended to increase the National Energy Regulator of SA licensing threshold for embedded generation projects from 1 MW to 100 MW, whether or not they are connected to the grid. This was a welcome development to ensure energy security.
Infrastructure: Following the Infrastructure Development Act and the ZAR 100 billion Infrastructure Fund, the Government announced major infrastructure projects and strategic integrated projects. Four projects worth a collective ZAR 21b were approved for implementation in 2021.
Environmental: Extended Producer Responsibility (EPR) regulations were published, which extend companies' financial or physical responsibility for identified products to their post-consumer stage.
A third draft of the Replacement National Environmental Management Act Financial Provisioning Regulations 2015 was published.
The position on trading of water entitlements was clarified.
SA was the first country in the world to grant the tax concession in Section 37D of the Income Tax Act to protect biodiversity.
Developments to incentivise renewable energy development in designated areas were welcomed, but a new requirement which has been introduced may prove onerous and cause significant delays.
Climate change guidelines will be published to assist with incorporating such considerations in applications for environmental licences.
Financial services: POPIA obligations also required a new perspective from the insurance industry.
Fintech: The African fintech market raised a record USD 1.44b, which exceeds the overall amount raised over the past 10 years. SA was able to secure a good portion of the funding as one of the four key fintech hubs, and much of this can be attributed to the responsive regulatory framework in the SA which continues to foster growth.
Healthcare: Discussions related to the provision of universal healthcare (through the National Health Insurance Bill) were halted due to Covid-19. The feasibility of universal healthcare remains a concern, more so now following the impact of Covid-19 on the economy.
Infrastructure: Following the Infrastructure Development Act and the ZAR 100 billion Infrastructure Fund, the Government announced major infrastructure projects and strategic integrated projects. Four projects worth a collective ZAR 21b were approved for implementation in 2021.
Transport: SA's national air carrier, SAA received ZAR 21b in government support – including ZAR 10.5b for a business rescue process.
Intellectual property: The proposed Copyright Amendment Bill and Performers' Protection Amendment Bill are both still in limbo. The President has raised concerns on the constitutionality of the former Bill. Welcome changes to SA's IP exchange control laws were also announced.
Mining: The Department of Mineral Resources (DMRE) issued an updated Guideline for a Mandatory Code of Practice for mines to mitigate and manage the impact of Covid-19.
The Constitutional Court handed down a landmark judgment related to secondary strikes.
The Chief Inspectorate of Mines issued two guidance notes: (i) to control the spread of HIV (read more) and (ii) to assist employers in preventing flammable explosions and following best practice in multi-blasting operations (read more).
The High Court ruled that the 2018 Mining Charter is policy, not law, and set aside various aspects of the Charter as unconstitutional.
Private Equity: SA has seen a lot of investment activity into affordable housing, healthcare and healthcare technology. More fund structures are supporting SMEs and more investors are realising that impact investing doesn’t mean less profit.
Restructurings, business rescues and liquidations: A Companies Amendment Bill published in 2021 had unintended consequences for business rescues.
Tax: A three-year rule to replace the financial emigration trigger came into force on 1 March 2021.
Telecoms, media and technology (TMT): The ICASA published an Information Memorandum for the licensing of the international mobile telecommunications (IMT) spectrum, also known as high-demand spectrum, for a second round of public consultation.
The ICASA announced the temporary suspension of the timetable for the licensing of WOAN and published final Regulations on the Limitations of Control and Equity Ownership by Historically Disadvantaged Groups and the Application of the ICT Sector Code.
The ICASA also published a notice of intention to conduct a market inquiry into signal distribution services in SA (read more) and the final Sports Broadcasting Services Amendment Regulations, which clarify its stance on the exclusivity of sports broadcasting rights.
The High Court ruled against the Advertising Regulatory Board (ARB) resulting in it having no jurisdiction over non-members. The ARB has filed an appeal against this ruling.
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