South African Business Law Developments
January, 2009, it was announced by South Africa's Department
of Science and Technology that the Intellectual Property Rights
Bill has officially been signed into law. The new law sets
out clear obligations regarding the ownership of intellectual
property rights in South Africa.
in the Government Gazette on December 22, 2008, the Intellectual
Property Rights from Publicly Financed Research (IPR) Act
has been developed to ensure the effective use of intellectual
property resulting from publicly financed research and development
– which has been considered a grey area.
specific object of the legislation is that intellectual property
resulting from publicly financed research and development
should be commercialized for the benefit of all South Africans,
and protected from appropriation.
this reason, the law provides for an enabling environment
for intellectual property creation, protection, management
will be provided by the National Intellectual Property Management
Office and the Intellectual Property Fund, as well as offices
of technology transfer at the institutions.
linked to the IPR Act is the Technology Innovation Agency
Act, which provides for the establishment of a public entity
to finance individuals and entities commercializing their
technological innovations and inventions.
Department of Science and Technology has expressed the hope
of establishing the agency this year in order to integrate
the management of disparate technological innovation initiatives
that are still at a developmental stage.
these initiatives are part of the Department's larger Ten-Year
Innovation Plan, aimed at driving South Africa towards a knowledge-based
economy in which the production and dissemination of knowledge
leads to economic benefits.
June 2007, the European Court of First Instance (CFI)
ruled against Ireland's Waterford Wedgewood in its trademark
dispute with a South African wine producer.
which makes Waterford Crystal, had opposed the bid by Stellenbosch
to register in the EU a fountain logo incorporating the words
'Waterford Stellenbosch', arguing that the common conjunction
of wine and crystal glasses could create confusion in the
minds of consumers.
a series of decisions and reversals on the matter in various
European fora over recent years, the CFI on Tuesday found
against Waterford, arguing that: wine and glasses "are
distinct by nature and by their use" and that they are
"neither in competition with one another nor substitutable".
the panel of three judges at the European court acknowledged
a "degree of complementarity" between the two products,
they went on to argue: "that complementarity is not sufficiently
pronounced for it to be accepted that, from the consumer`s
point of view, the goods in question are similar".
meanwhile, pledged to pursue the matter through various national
and European courts. It was also reportedly considering lodging
an appeal against the CFI decision.
July, 2005, a newly reinstated requirement to submit
annual returns and fees to the Companies and Intellectual
Property Registration Office (CIPRO) had South Africa's small
and medium-sized enterprises up in arms.
requirement to submit documents detailing companies' directors,
registered address, auditors and other information to the
Office was dropped by the South African authorities in 1986,
but was reinstated "for purposes of data integrity and information
reliability", according to CIPRO.
addition to the increased administrative burden being placed
on the country's businesses, industry groups argued that the
R450 fee and the need for online submission of the return
may present a sticking point for many small businesses.
a letter to Mandisi Mpahlwa, the South African Trade and Industry
Minister, the Cape Town Regional Chamber of Commerce and Industry
payment of the prescribed fees is viewed by business as nothing
short of a tax. R450 might not seem a large amount for some
companies, but there are hundreds of small and dormant companies
and close corporations for whom R450 a year is a considerable
that the fees are likely to cost the business sector in the
region of R619 million per year, the letter continued:
would government, via Cipro, need to drain 600m a year out
of the economy to keep a record system up to date? Surely
basic statistical information for record-keeping purposes
can be obtained via the South African Revenue Service with
the approval of the finance minister."
May, 2005, following the release of a report on counterfeiting
and piracy world-wide by Canada's Gieschen Consultancy,
South African intellectual property (IP) experts warned that
such activities are on the increase nationally.
consultancy, which provides counterfeit intelligence analysis
and security research relating to documents, products and
intellectual property, revealed that in the first quarter
of 2005, 279 incidents of intellectual property theft (brands,
trademarks and copyrights) took place internationally, accounting
for 33% of global counterfeiting and piracy, and valued at
report went on to reveal that more than 141 million counterfeit
items were seized by customs, law enforcement and brand enforcement
agents, which led to the discovery of an additional $255 Million
in losses related to IP theft.
law expert, Reinhardt Buys suggested that IP theft was becoming
increasingly prevalent in South Africa, observing that:
problem in SA is not so much counterfeit software, music and
DVDs, but the rapid increase in the use of peer-to-peer networks
to download illegal content."
went on to add:
"In terms of the 2003 survey by the Business Software Alliance,
SA was one of the bottom 20 pirating countries. I'm sure we're
now moving closer to the top of the list."
April, 2008, South African Trade and Industry Minister Mandisi
Mpahlwa officially launched a revised film and television
production incentive regime, which
aims to increase local content generation and improve
location competitiveness for foreign film productions
in South Africa.
new package comprises the Location Film and Television Production
Scheme, and the South African Film and Television Production
and Co-Production Scheme. The incentives are intended to increase
local content generation and improve location competitiveness
for filming in South Africa.
Location Film and Television Production scheme will replace
the Large Budget Film and Television Production Rebate, which
the Department of Trade and Industry (DTI) implemented in
2004. This component is only available to foreign-owned productions
with Qualifying South African Production Expenditure (QSAPE)
of R12mn (USD1.5mn) and above.
provides a rebate of 15% of the QSAPE to qualifying productions
in the following formats: feature films, telemovies, television
drama series, documentaries, animation and short form animations.
Its aim is to attract large-budget overseas film and television
productions to South Africa.
South African Film and Television Production Incentive is
being introduced in order to provide more financial support
for locally-owned productions and co-productions. This component
is available to both South African productions and official
treaty co-productions with a total production budget of R2.5mn
provides a rebate of 35% for the first R6 million, and 25%
for the remainder of the qualifying production expenditure.
The following formats are eligible: feature films, telemovies,
television drama series, documentaries, animation and short
value of the rebate for any qualifying production is capped
at a maximum of R10mn.
the following key changes are being introduced:
reduction of the threshold from R25mn QSAPE for foreign-owned
productions to R12mn;
A differential requirement that local-owned productions
and co-productions must have at least R2.5mn of total production
An increase of the rebate from 25% up to 35% for local productions
in order to ensure higher financial support for local productions;
The reduction of the threshold will make the bundling of
productions unnecessary for producers;
The provisions of the incentive will encourage production
companies to advance industry transformation through adherence
to the requirements of Broad-Based Black Economic Empowerment.
All productions approved under the Large Budget Film and
Television Production Rebate would still be treated under
the rules of that scheme, and would not be able to convert
to the new incentive, according to the government.
is increasing in South Africa, says The Freedom of
Expression Institute in a report on its Anti-Censorship Programme
(ACP), which has been in existence since June 2002. A decision
was taken to establish the ACP after the FXI experienced a
sharp rise in the number of censorship cases it was being
called on to handle.
ACP says that popular forms of expression are under threat,
such as mass meetings, assembly and demonstrations, and the
use of popular media, like graffiti and pamphlets. Its cases
relate especially to the overly restrictive regulation of
assembly and demonstrations, through the Regulation of Gatherings
Act. Very few of the ACP's cases relate to more 'traditional'
forms of media freedom violations, such as the censorship
ACP has also been campaigning against the Anti-Terrorism Bill
and other new pieces of censorship legislation coming into
the statute books, and has also been developing legal strategies
to remove old apartheid legislation from the books.
government will fulfil its pledge on multi-lingual broadcasting
by launching two new state-owned regional television stations
to ensure that all of the country's 11 official languages
are represented in the broadcasting media. Communications
Minister Ivy Matsepe-Casaburri, says that Bop Broadcasting
will be closed and its assets used to launch a new regional
service broadcasting Tswana, Sotho, Pedi, Tsonga and Venda.
second channel will also be launched that will broadcast in
Afrikaans, Ndebele, Tswana, Swati, Xhosa and Zulu. The launches
are expected to take place next year.
was announced in May, 2008, that the Dubai Financial Services
Authority (DFSA) has entered into a Memorandum of
Understanding (MoU) with the Financial Services Board
of South Africa (FSB).
signing took place between David Knott, Chief Executive of
the DFSA, and Rob Barrow, the Executive Officer of the FSB,
during the Annual Conference of the International Organisation
of Securities Commissions (IOSCO) being held in Paris.
FSB supervises the activities of non-bank financial institutions
and other financial services in South Africa, including licensed
exchanges, clearing houses, collective investment schemes
and all types of insurance and retirement fund activities.
with regard to the MoU, David Knott commented that: “The
Financial Services Board of South Africa is a valued member
of IOSCO and a leading participant in the African and Middle
East Region, of which the DFSA is also a member."
the FSB and the DFSA are signatories to the IOSCO Multilateral
MoU, having satisfied the highest standards of co-operation
and assistance among IOSCO members. It is enhanced by today’s
bi-lateral agreement which reflects each agency’s responsibilities
in the regulation of securities and insurance.”
more South African financial services firms join the Dubai
International Financial Centre (DIFC), this relationship will
assume increasing importance, as regulators rely on the quality
of regulatory standards administered in the other’s
In Finance Minister Trevor Manuel's 2007 budget address in
February, reforms to dividend taxes were announced.
aim to reform the 12.5% secondary tax on companies and replace
it with a 10% tax on shareholders’ dividends withheld
by companies over the next two years. This will apply to all
distributions regardless of profits and the base of taxable
dividends will broaden beyond the current narrow interpretation
equity investment tax reforms will see all shares disposed
of after three years triggering a capital gains tax event.
Currently, gains realised on the sale of shares can be taxed
either as ordinary income or capital gains, depending on facts
and circumstances, but the government says that this 'facts
and circumstances' test has become "problematic"
and results in some large institutions receiving capital gains
tax treatment on the sale of shares, and many other individuals
paying ordinary income tax.
In a bid
to encourage long-term savings, including higher levels of
domestic savings and provision for retirement, Manuel also
proposed to abolish the tax on retirement funds and increase
certain monetary thresholds with respect to retirement funds
and estate duties. Retirement Fund Tax (RFT) on interest and
rental income will be abolished with effect from 1 March 2007.
also announced its intention to simplify tax rules permitting
lump sum withdrawals upon retirement which have become overly
were additionally announced to the taxation of foreign collective
investment schemes which would alleviate the higher tax and
compliance burden on such schemes in the hands of long-term
in February, 2005, at the Raging Bull Awards, co-hosted by
the Personal Finance news service and the Association of Collective
Investments, chairman of the South African Financial Services
Board, Dr Cyrus Rustomjee revealed that the FSB planned to
license hedge fund products within a year.
hedge funds were permitted to locate in South Africa, they
were not regulated by the authorities, and therefore not marketed
to the country's investors.
under the guidelines formulated by the financial regulator
following extensive consultation with the unit trust industry,
such products were to make their debut on the wider market
in early 2006.
African Finance Minister, Trevor Manuel announced in June,
2004, that the deadline for banks to re-identify their
customers for 'Know Your Customer' (KYC) purposes had
the 2001 Financial Intelligence Centre Act 38, banks and other
"accountable" institutions, such as casinos, law firms, and
estate agencies, were, from June 30 2003, obliged to verify
the identity and residence of new clients before proceeding
affected institutions were also obliged to provide such data
for their existing clients, but were initially given until
the end of June to do so. The law stipulates that should the
banks not receive the necessary information from their customers,
they must freeze the 'questionable' accounts until such time
as verification of the account holder's identity is obtained.
to protests from many of the country's banks, which argued
that they were likely to miss the deadline due to difficulties
in obtaining the necessary proofs of identification and residence
from their poorest clients, Mr Manuel last week unveiled three
Finance Minister explained that customers designated as high
risk were to be identified by December 31, 2004, medium risk
customers by September 30, 2005, and low risk customers by
September 30, 2006.
to reports in the South African media, Mr Manuel was careful
to stress that the extension of the deadline was "no admission"
that the original demands made by the government were too
South African investment industry was thrown into confusion
in March after the Financial Services Board ordered all fund
managers to stop selling hedge funds and alternative investment
products, forcing the authorities to issue a clarification.
controversy arose after the FSB sent a letter to approved
fund managers, intended to clarify certain limitations relating
to the Stock Exchanges Control Act, 1985 and The Financial
Markets Control Act, 1989. Specifically, the letter stated
that fund managers could not sell hedge fund products or alternative
investment schemes to individuals and pension fund organisations
until the FSB had determined the requirements under which
these could be marketed and managed.
indicate that the letter induced a certain amount of panic
amongst investment managers, and the FSB, in tandem with the
Alternative Investment Managers Association (South African
Chapter) were forced to word an additional clarification in
approval granted to investment managers relates to their being
approved to buy and sell securities on behalf of their clients.
It does not provide them with any form of approval, tacit
or implied, either to manage hedge funds or to sell hedge
funds to individuals or pension fund investors," read the
joint FSB/AIMA release.
terms of the current regulatory regime, hedge funds fall outside
the scope of existing regulation and there is nothing preventing
investment managers from conducting the business of a hedge
fund provided that they do not represent to have been approved
by the FSB to manage and/or solicit for investment into hedge
funds," the statement continued, adding:
is therefore suggested that any hedge fund material should
state such restrictions clearly on the face of such documentation
and all participants in the hedge fund industry must ensure
that they act responsibly in their conduct.
UK government last week urged its South African counterpart
to liberalise the country's legal services market
by removing restrictions on foreign lawyers.
Legal Services Minister, Baroness Cathy Ashton met with members
of the South African Government to discuss opening up the
market to UK legal firms.
South Africa is an attractive market for foreign lawyers,
there are many difficulties facing them. They cannot enter
into partnership with South African lawyers, are subject to
onerous re-qualification requirements, and are required to
be citizens or residents of South Africa in order to practise
in the country.
Ashton explained last week that: "There
are great opportunities for British legal firms overseas.
South Africa is fast moving away from being an inward-looking
protectionist economy and becoming an internationally competitive
liberalisation of South Africa's legal services market would
greatly help this process. A liberal legal services market
helps to attract foreign direct investment; brings more work
into the country for both local and international lawyers
and helps local lawyers raise the level of the services they
provide, so increasing their competitiveness on the international
Bar Council and Law Society have edged forward towards a unified
profession, but not fusion, in a meeting in January,
Justice Ministry had issued a consultation paper on the subject
four years ago, saying: 'The
legal profession has to be transformed in order to be able
to respond properly to the needs of all the people of South
Africa', and proposing to create a single profession of 'legal
practitioners' via the standardisation of entrance exams,
and to address the low representation of black lawyers and
women in the legal hierarchy.
Bar Council agreed to form a liaison committee with the Law
Society to start talks - but despite some progress, a final
agreement is still a long way off. Even the government seems
to be sitting on its hands over the issue. As with all governments,
the high proportion of lawyers in its ranks means that legal
reform is an agonising and unsatisfactory process. Quis custodies
April, 2009, a new Companies Bill was signed into law, which
promises to reduce the regulatory burden on companies,
particularly small- and medium-sized enterprises (SMEs).
Companies Act, No. 71 of 2008, was published in the Government
Gazette as of April 9, 2009. Commenting on the new legislation,
Zodwa Ntuli, Deputy Director-General of the Consumer and
Corporate Regulation Division (CCRD) of the Department of
Trade and Industry said: “The new Act brings about
a lasting mechanism to facilitate the rescuing of businesses
that are in financial distress. It is aimed at ensuring
that companies are saved before they reach a stage of insolvency
and ultimate liquidation."
added: "Both companies and workers will be empowered
to initiate business rescue plans, where there are apparent
signs of distress. This will ensure the efficient running
of companies, while strengthening means of sustaining jobs
in the economy. We want to promote efficiency and economic
growth, retain efficient resources and save jobs."
government claims that the 2008 Companies Act lends a helping
hand to SMEs by reducing the regulatory burden placed on
them. While all companies will be required to prepare annual
financial statements under the legislation, this is largely
intended to encourage sound financial management. However,
some enterprises will be exempted from having their financial
statements audited or reviewed, depending on their size,
workforce and nature of their activities.
legislation also simplifies the framework on compliance
issues, in respect of the structure, registration and maintenance
of companies, so as to reduce the need for intermediaries,
and save businesses time and money in the process.
addition, the 2008 Act promotes shareholder activism, especially
in relation to minority shareholders and foreign investors.
In this regard, the required support for the calling of
a shareholders meeting has now been reduced to 10%. The
new Act also makes provision for an audit committee to be
appointed by shareholders of a company, which entrenches
the role of shareholders and the level of independence that
should be maintained between audit committees and boards
of companies. Further, more comprehensive corporate governance
principles, to promote the effective functioning of companies,
will be compulsory under the new Act.
Act will go a long way in promoting sound corporate governance,
transparency, and access to information, amongst other regulatory
oversight improvements," argued Ntuli.
country will also see a more effective and robust investigative
approach to company complaints and the resolution thereof,"
July, 2008, South African Trade and Industry Minister, Mandisi
Mpahlwa, announced details of new investment incentives
at the launch of the Enterprise Investment Programme (EIP)
in Pretoria. The new incentives are targeted at stimulating
growth, employment and broadening participation,
and were introduced later that month.
EIP currently comprises of the Manufacturing Investment
Programme and the Tourism Support Programme. The programme
is accessible to both local and foreign owned entities wishing
to locate their operations in South Africa.
explained that the EIP provides an investment grant of between
15% and 30% towards qualifying investment in plant, machinery
and equipment and customised vehicles required for establishing
new or expanding existing production facilities or upgrading
production capability in existing clothing and textiles
to the minister, a separate selection criterion has been
developed to ensure that support for tourism projects achieves
objectives for employment creation and promotes tourism
enterprise activities in new areas outside the areas that
already have an established tourism industry.
Town, Johannesburg and Ethekwini metropolitan areas for
example, are not prioritised for tourism incentive support,
as they already have a critical mass of tourism product.
However, projects locating in marginalised areas within
these metropolitan areas are eligible to apply.
introduction of the Enterprise Investment Programme (EIP)
was part of an implementation plan arising from the broader
incentives review process, which includes modifying certain
incentives, benchmarking the incentive practices in other
economies, as well as the introduction of new incentives
to promote investment, growth and employment creation.
EIP is aligned to the National Industrial Policy Framework
(NIPF), which was approved by Cabinet in 2007.
before the South African Parliament's Trade and Industry
Committee in June, 2005, the T&I Department's director of
institution management, Magauta Mphahlele revealed that
the government had decided not to continue allowing the
business community to self-regulate on consumer
claimed that existing voluntary schemes had allowed some
firms to shirk their responsibilities, leading the authorities
to propose the introduction of a new law to protect consumers'
proposed legislation is set to make unfair or discriminatory
practices in the areas of marketing and selling illegal,
in addition to regulating pricing and availiability, and
setting service standards for the public sector.
to the South African media in February, 2005, Jacques Marnewicke,
head of forensic investigations at financial services group,
Sanlam revealed that institutions affected by the new Financial
Intelligence Centre Act are concerned that there
are no official guidelines regarding required levels of
compliance with the legislation.
to the Business Report news service, representatives of
the affected industries (which include the legal services,
finance, brokerage and real estate sectors) are holding
talks to try to find a mutually-agreeable compliance standard.
is worried that if they are too strict in their interpretation
of the act they will lose market share to competitors who
comply with the letter but not the spirit of the law," Business
Report quoted Mr Marnewicke as observing.
denies that it has contravened the Competition Act,
after four freight forwarding companies alleged that the
airline charges them excessive fees, amounting to an abuse
of SAA's dominant position in the market.
the Competition Commission refused to make a referral of
the complaint, the firms took their case to the Competition
Tribunal. Now, however, three of the firms have dropped
out, leaving only Freitran to continue at the Tribunal.
February, 2005, deadline for the freezing of bank
accounts held in South Africa by 'high risk' customers
who had not presented their banks with adequate identification
was rigidly enforced across the board.
an effort to combat money laundering under the auspices
of the Financial Intelligence Centre Act, bank customers
had been given until June 30, 2004, to re-identify themselves.
However, Finance Minister Trevor Manuel extended the deadline,
introducing staggered limits for the various types of business
and individual bank customers.
Financial Intelligence Centre ordered banks to freeze by
the beginning of February the accounts of those customers
designated 'high risk' who had failed to assist in the know
your customer (KYC) initiative.
(Amalgamated Banks of South Africa) revealed that more than
90% of its high priority customers had presented the required
documents, leaving just a small number of accounts to be
reported a similarly high success rate, announcing that
around 97% of its high risk customers had complied with
the anti-money laundering regulations.
January, 2005, banks in South Africa began freezing
the accounts of those customers designated as "high
risk" who did not identify themselves by the December 31
deadline imposed by the Financial Intelligence Centre Act.
original deadline for all customers of South African banks
to provide adequate identification, in order to bring the
country into compliance with international anti-money laundering
standards, was June 30, 2004.
the banks complained that this was not realistic, leading
to the introduction of staggered deadlines for trusts and
partnerships, non-resident account holders, high risk account
holders, and those considered low risk.
no exact definition of a high risk customer has been provided
by the authorities, experts have suggested that businesses
with monthly account turnovers of more than R50,000 and
individuals with account turnovers of R25,000 are likely
to come under increased scrutiny if they have thus far failed
to provide the required identification documents.
(Amalgamated Banks of South Africa) said that more than
90% of its high priority customers had presented the required
documents, leaving just a small number of accounts to be
reported a similarly high success rate, announcing that
around 97% of its high risk customers had complied with
the anti-money laundering regulations.