1. Introduction

1.1. This case involved Mr Mangundhla and Ms Dangaiso, who both had trading accounts on the Luno platform, a well-known cryptocurrency trading platform. [1] Ms Dangaiso does not trade in cryptocurrency, but her involvement in the case arose solely from the fact that Mr Mangundhla used her account to circumvent the limit that would ordinarily apply to the trades he could carry out using his account alone. Mr Mangundhla traded in cryptocurrency quite lawfully for an extended period between April 2015 and December 2017. [2] However, from January 2018, Mr Mangundhla’s behaviour on the accounts changed. Between January 2018 and March 2020, Mr Mangundhla used the accounts to ‘funnel’ just under 1680 Bitcoin purchased in the Republic of South Africa (“South Africa“), worth just under R182 million, to Bitcoin wallets that were only accessible through cryptocurrency exchanges registered outside South Africa. [3]

1.2. The South African Reserve Bank (“SARB“) took the view that the conduct amounted to the export of Bitcoin and the Rand value thereof, which was contrary to Regulation 10(1)(c) of the Exchange Control Regulations of 1961 (“Excon Regulations“). [4] Exercising its delegated powers under Regulation 22B of the Excon Regulations, the Deputy Governor declared forfeited to the State approximately R6 million in Bitcoin assets and the money standing to the applicants’ credit in their respective bank accounts with The Standard Bank of South Africa Limited and Luno cryptocurrency trading accounts. [5] The applicants sought to review and set aside the forfeiture orders, principally on the basis that the Excon Regulations do not apply to cryptocurrency. [6]

1.3. In the Gauteng Division of the High Court, Wilson J was asked to determine the central question in this case – whether cryptocurrency (in this instance Bitcoin) constitutes either “money” or “capital” for the purposes of Regulation 10(1)(c) of the Excon Regulations. Wilson J concluded that it is both “money” and “capital” for exchange control purposes. [7]

2. Is Cryptocurrency “Capital” in Terms of Regulation 10(1)(c) of the Excon Regulations?

2.1. In reaching his conclusion that Bitcoin is “capital”, Wilson J began with the text of Regulation 10(1)(c) of the Excon Regulations, which provides that no person shall, except with permission granted by the Treasury, enter into any transaction whereby capital or any right to capital is directly or indirectly exported from South Africa. [8]

2.2. Wilson J held that the effect of the Regulation must be determined by a consideration of the ordinary grammatical meaning of its text, the context in which the text appears and the purpose of the Regulation read in light of the overall purpose of the legislation in which it appears. [9] In considering the ordinary meaning of “capital”, Wilson J relied on the judgment by the Supreme Court of Appeal (“SCA“) in the case of Oilwell (Pty) Ltd v Protec International Ltd 2011 (4) SA 394 (SCA) (“Oilwell Judgment“), in which the SCA found that the Excon Regulations deploy the word “capital” in its financial sense, i.e. ‘cash for investment‘ or ‘money that can be used to produce further wealth‘. [10]

2.3. The Oilwell Judgment, according to Wilson J, is not authority for equating “capital” to “money”, as there would be no differentiation between the words “capital” and “currency” in the Excon Regulations if that were so. [11]

2.4. The court in Mangundhla used the purposive approach: the (i) ordinary meaning of the text, (ii) context within which the word was used and (iii) purpose of the legislation to conclude that “capital” in the Regulations means “any financial asset that is capable of holding value or being used as a medium of exchange“. This includes all fiat currency, but would also include any negotiable instrument, or any other document or token that bears a fixed or ascertainable exchange value. [12]

2.5. Wilson J held that despite the “intangible and technological features” of Bitcoin, it is still a virtual currency, capable of holding value and being used as a medium of exchange i.e., capable of being exchanged for fiat currency, which makes it capital for purposes of the Excon Regulations.[13]

2.6. The court held that the regulation of Bitcoin as capital is essential to maintain the effectiveness of the capital controls embodied in the Currency and Exchanges Act No 9 of 1933 and the Excon Regulations. Were it otherwise, those controls would be virtually worthless, as anyone who wished to take their money abroad could do so without Treasury oversight, simply by converting it into cryptocurrency and transferring it to a foreign cryptocurrency exchange. [14] This would be completely at odds with the underlying purposes of the exchange control regime, which is to regulate, and, where necessary to curb, the outflow of capital. [15]

2.7. Wilson J held that Motha J in Standard Bank of South Africa v South African Reserve Bank 2025 (5) SA 289 (GP) (“Standard Bank Judgment“) erred in focusing on the nature and “intangible and technological characteristics” of cryptocurrency rather than the real world consequences of its use. [16] Wilson J concluded that courts should be careful not to ascribe unusual or irreducibly exotic properties to phenomena which, though novel and perhaps unique in some respects, exhibit precisely the attributes an enactment is intended to regulate. [17]

2.8. The court in Mangundhla reaffirmed that a court’s function in interpreting statute is to give its meaning in terms of text, context and the purpose of the legislation, even if such interpretation attracts “harsh consequences“. [18] The law is to be applied as it is found. [19]

3. Is Cryptocurrency “Money” in Terms of Regulation 22A and 22B?

3.1. The applicants submitted that the forfeiture orders applied only to the money in their respective bank accounts, but not to the Bitcoin in their respective Luno wallets, as Bitcoin does not constitute “money” or “goods” in terms of Regulations 22A and 22B of the Excon Regulations. [20]

3.2. “Money” under the Excon Regulations is defined to include “any bill of exchange or other negotiable instrument“. [21]

3.3. Wilson J held that the qualities he attributed to Bitcoin are sufficient to bring it within the definition of a “negotiable instrument” in that it is no more than a right to be credited a specified sum of Bitcoin, which is itself exchangeable for fiat currency and other things of value.[22] In addition, Wilson J held that even if the foregoing is incorrect “Bitcoin’s general characteristics bring it well within any sensible conception of money“, as it (i) can be converted into fiat currency, (ii) can also be used directly to purchase goods and services from merchants who accept it, (iii) is a medium of exchange and (iv) a store of value. [23]

3.4. In Wilson J’s view, Bitcoin is clearly money. Accordingly, the Bitcoin was correctly subject to forfeiture. [24]

Conclusion

This judgment by Wilson J is significant for several reasons. First, it applies a purposive approach to the interpretation of the Excon Regulations and concludes that Bitcoin is both “capital” and “money” for the purposes of the exchange control regime. Second, Wilson J concludes that the Standard Bank Judgment is wrong, creating a conflict in authority in the Gauteng Division of the High Court on the question of whether cryptocurrency falls within the ambit of the Excon Regulations. Third, the judgment confirms that the transfer of Bitcoin to cryptocurrency wallets on exchanges registered outside South Africa amounts to the “export” of capital, even if the wallets can be accessed from anywhere in the world. [25]

The review application was dismissed and the forfeiture orders were upheld. Wilson J did, however, express some hesitation in endorsing the forfeiture order made against the money in Ms Dangaiso’s bank account, noting that given her apparently limited involvement in Mr Mangundhla’s activities, an order for forfeiture against her might be disproportionate. However, no such case had been made out by the applicants. [26]

[1]        Mangundhla and Another v The South African Reserve Bank and Others (2022/029979) [2026] ZAGPJHC 579 (1 June 2026), para 2

[2]        Ibid

[3]        Ibid

[4]        Supra, para 3

[5]        Ibid

[6]        Supra, para 6

[7]        Supra, paras 13 and 34

[8]        Supra, para 10

[9]        Supra, para 11

[10]      Supra, para 12

[11]      Supra, para 13

[12]      Ibid

[13]      Supra, para 14

[14]      Supra, para 18

[15]      Ibid

[16]      Supra, para 24

[17]      Ibid

[18]      Ibid

[19]      Ibid

[20]      Supra, para 33

[21]      Supra, para 34

[22]      Ibid

[23]      Ibid

[24]      Ibid

[25]      Supra, para 26

[26]      Supra, para 35

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Key implications of the proposed amendment to the procedure that will be followed by the Competition Commission when firms subject to merger conditions (“merged entities“) are believed to have breached those conditions.

Introduction

Rule 39 of the Competition Commission’s Rules sets out the process to be followed by the Commission if it has information indicating that firms (“merged entities“) which were given conditional merger approval have failed to comply with the merger conditions. On 6 May 2026, the Minister of Trade, Industry and Competition published, for public comment, a notice proposing to repeal the current Rule 39 in its entirety and replace it with a new rule.

In summary, the proposed amendment is a mixed development: it introduces a more structured and transparent procedure but simultaneously increases the evidentiary and compliance burdens on merged entities.

The current rule

Under the current Rule 39, there is no express provision for the Commission to conduct a formal investigation into possible non-compliance with merger conditions. However, where it appears to the Commission that a firm has breached a merger condition, the Commission must issue a “Notice of Apparent Breach”. The merged entity then has 10 business days either to submit a remedial plan or to request the Tribunal to review the Notice on the ground that it has “substantially complied” with its obligations. The textual language indicated that this is a review. A review involves challenging an administrative decision (or other exercise of public power) on the basis that it was not rational, reasonable, or procedurally fair. This is different from an appeal, where the question would be whether, on all the facts, the Commission was correct or incorrect. However, in Coca-Cola, [1] the Constitutional Court held that this is not an ordinary administrative-law review but a “special statutory review“, the single permissible ground being whether the firm has substantially complied, based on an objective enquiry by the Tribunal into actual, not merely apparent, breach.

Key changes under the proposed rule

Investigation and finding before any notice

The proposed rule replaces the Notice of Apparent Breach with a “Notice Requesting Compliance”. However, before issuing a Notice Requesting Compliance, the Commission must conduct an investigation into whether a breach has occurred. This is a significant procedural improvement, affording the merged entity a meaningful opportunity to engage with the Commission before any formal notice is issued. The merged entity would therefore need to be informed by the Commission of the investigation and to provide information and documents requested by the Commission. In that process, the merged entity has the opportunity to provide additional information if it believes it will assist its case and to make representations that no breach has occurred, all in the context of a formal investigation.

In contrast, under the current rule a party that receives a Notice of Apparent Breach is immediately placed under pressure, within 10 business days, either to bring review proceedings to the Tribunal on the grounds that it has substantially complied with the conditions or propose a remedial plan. The new power to investigate is discretionary (“may”), so the Commission retains flexibility, but the investigation is a procedural prerequisite to any further action.

An additional benefit to merged entities is that the Commission must make a finding that there has been a breach of a merger condition. The Commission can no longer issue a Notice on the basis of only an “apparent” breach. We expect that the Commission will be more careful to ensure it weighs all the relevant facts before issuing a Notice under the proposed rule.

Timelines

The current rigid 10-business-day response period (triggered by the Notice of Apparent Breach) is removed under the new rule. Instead, in a Notice Requesting Compliance, the Commission will stipulate the period for compliance or for submission of a remedial plan. While the Commission could in theory set the same 10 business day (or a shorter) deadline, the Commission is, in our view, more likely to set a deadline that is reasonable based on the particular facts and circumstances. Furthermore, the formal investigation phase will likely result in merged entities having better notice before the Commission makes a decision. In most cases, merged entities will likely be in a better position to prepare, as typically one can get a sense of the direction in which the Commission is heading during an investigation. Currently, the lack of a formal investigation as a prerequisite can result in the Commission issuing a Notice of Apparent Breach with little (and sometimes no) advance notice.

Adversarial proceedings before the Tribunal

Under the current rule, the merged entity’s recourse is a statutory review of a Notice of Apparent Breach, which need not be accompanied by an affidavit or other supporting document setting out the Commission’s findings and conclusions. While the Constitutional Court held that the Commission should provide sufficient information for the merged entity to “appreciate the nature of the breach complained of”, under the proposed rule the Commission may apply to the Tribunal for an order compelling compliance, and the firm is expressly entitled to oppose that application. The Commission’s application will need to be brought under Tribunal Rule 42, which is a general provision for proceedings not otherwise specifically provided for. That rule requires the applicant (in this case, the Commission) to bring the application supported by an affidavit setting out the “facts on which the application is based“. While the reverse onus (discussed immediately below) is problematic, the Commission will only be able to take the matter forward with an affidavit setting out its findings for why it believes a merger condition has been breached. The merged entity will have the opportunity to assess the Commission’s full case.

Reverse onus

So far, the amendments summarised above are favourable. Unfortunately, sub-rule (6) provides that the firm bears the onus of proving that it has complied with the merger condition. This is not framed as a rebuttable presumption but as a full transfer of the burden of proof to the merged entity. The constitutionality of this provision is questionable but, unless changed in the final rule or successfully challenged, this is where the first significant concern for businesses arises. It is heavily burdensome because the rule purports to shift the entire onus to the respondent, whereas in other matters where a burden is shifted from the applicant to the respondent, it is typically either no more than a presumption that needs to be rebutted by the respondent, or the applicant must, at minimum, first make out a prima facie case. Indeed, in settling the special statutory review standard under the current rule, the Constitutional Court held that if the merged entity makes out a prima facie case of substantial compliance, the evidential burden of rebuttal shifts to the Commission. The Court also referred to the Commission’s “exceptionally wide” investigative powers, stating that this provided the Commission with “more than adequate tools… to gather evidence to satisfy a burden of rebuttal“. It is hoped that the proposed amendment to impose a full onus on the merged entity – which will, after all, be a respondent in the proceedings – is not retained in the final amended rule.

Removal of the concept of “substantial compliance”

Under the current rule, merged entities can succeed in overturning a Notice of Apparent Breach by demonstrating substantial compliance with the merger conditions. The proposed amended rule replaces this with the requirement that the merged entity must “comply” with a Notice Requesting Compliance or succeed in proving to the Tribunal that it “has complied”. This appears to require absolute compliance (subject only to the common law principle of de minimis, in terms of which a trivial non-compliance ought not to be actionable by the Commission). For entities operating under complex or prescriptive conditions, this shift represents a meaningful increase in risk.

Engagement and remedial plans

Notwithstanding the increased burdens, the proposed rule establishes a more meaningful engagement process at both the investigation stage and the remedial plan stage. In practice, one would expect the Commission to engage constructively before launching Tribunal proceedings and to work collaboratively on remedial plans, particularly where the firm has demonstrated good faith.

Conclusion and practical guidance

 The proposed amendment is a mixed development. It provides procedural clarity, a meaningful opportunity to engage with the Commission before any notice is issued, and a requirement that the Commission bring an application to the Tribunal to commence adversarial proceedings. However, the reverse onus and the removal of the substantial compliance standard materially increase the burden on merged entities.

Firms subject to merger conditions should consider the following practical steps.

• Conduct a detailed review of all outstanding merger conditions to assess whether current compliance efforts achieve full, actual compliance, not merely substantial compliance.
• Ensure that comprehensive records of compliance are maintained, given that under the proposed rule the evidentiary burden of proving compliance will fall on the merged entity in any Tribunal proceedings.
• Consider whether to submit – or ensure that your industry association or similar body submits – written comments on the proposed amendment by the 17 June 2026 deadline, particularly in relation to the reverse onus provision and the removal of the substantial compliance standard, both of which may have a material bearing on the firm’s position.
• Finally, firms that are currently the subject of any investigation or engagement with the Commission in relation to merger conditions should take stock of how the transition to the new rule may affect any ongoing processes.

[1] The nature of that review was settled by the Constitutional Court in Coca-Cola Beverages Africa (Pty) Ltd v Competition Commission [2024] ZACC 3 (“CCBA“)

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Introduction

In this article series, we take a deep dive into the South African Conduct of Financial Institutions (COFI) Bill – a major financial sector regulatory reform – one theme at a time.

COFI was drafted in conjunction with the Financial Sector Regulation Act (FSRA), the two pillars of the Twin Peaks regulatory reform. The Twin Peaks regulatory reform is a response to financial system weaknesses identified by the 2008 Global Financial Crisis, such as the systemic risks of large insurers and inappropriate market conduct practices.

The FSRA has already been implemented. The FSRA introduced the Twin Peaks regulatory framework, bringing into existence two regulators for the industry. The first regulator is the Prudential Authority (PA) responsible for the prudential regulation of financial institutions, while the second is the Financial Sector Conduct Authority (FSCA) responsible for regulating market conduct.

COFI represents a major overhaul of how financial institutions will be regulated in South Africa. Currently, different financial institutions are regulated by different legislation. COFI will involve shifting to a harmonised, principles-based conduct regime focused on customer outcomes, transparency and inclusion. COFI also provides for a single licensing and supervision framework and stronger enforcement and standards across the financial sector. Its implementation will unfold over several years and reshape regulatory expectations for financial institutions and consumers alike.

National Treasury has indicated that COFI will be finalised in 2026. COFI has recently been adop­ted by Cab­inet for sub­mis­sion to Par­lia­ment.

Licensing: Part 2

In our previous article in this series, we looked at the Purpose and Application of COFI. In this article, we look at the licencing framework under COFI.

COFI introduces a unified market conduct licensing regime, replacing the fragmented system of industry-specific authorisations with a single licence issued by the FSCA. This licence is activity-based, marking a fundamental shift from the current model in which financial institutions are licensed according to their institutional form (for example, as banks or insurers). In other words, under COFI, it is not what you are, but what you do that counts.

Under COFI, licensing will be aligned to the specific activities performed by an institution. A single financial institution may hold one FSCA licence with multiple activity authorisations, reflecting the reality that many institutions operate across different product lines and services.

The framework adopts a three-tiered approach to licensing: (a) the financial activity being performed; (b) the financial product/s to which that activity relates; and (c) the category of customer to whom the product or service is provided.

This structure is intended to enable more granular and risk-based regulation, but it will also require firms to undertake careful analysis of how their business models are categorised under COFI.

Transition to the new regime

Financial institutions currently licensed under existing sectoral laws will transition into the COFI regime through a mapping process, in which their existing permissions are aligned to the new activity-based framework. This transition is expected to take place over a staggered period. This approach is broadly consistent with the implementation of the Insurance Act, 2017.

New entrants, however, will be required to apply directly under the COFI framework once it comes into force.

Notwithstanding the conceptual clarity of the activity-based model, practical concerns have been raised: the transition to COFI will involve a large-scale relicensing exercise, potentially affecting thousands of institutions. This raises concerns about regulatory capacity, implementation timelines and the operational burden on firms required to reassess and map their activities.

Dual licensing under Twin Peaks

In line with the Twin Peaks regulatory model, under which institutions are subject to both market conduct and prudential regulation, certain institutions will continue to require authorisation from both the FSCA and the PA, depending on the nature of their activities.

Outsourcing

COFI recognises that financial institutions frequently outsource certain activities and contemplates a differentiated approach:

• in some cases, outsourced service providers may be required to hold their own licences;
• in others, the licensed financial institution will remain fully responsible for the outsourced activity, even where the service provider is not licensed.

The FSCA will be able to set conduct standards for outsourced activities and to take enforcement action against service providers where appropriate. This reflects a broader regulatory focus on functional accountability, rather than formal legal structure.

There remains ongoing uncertainty regarding the treatment of juristic representatives. The activity-based framework appears, in some contexts (notably, discretionary investment management), to require entities currently operating as juristic representatives to obtain their own licences. However, the position is less clear in relation to other activities, such as the provision of financial advice. This lack of clarity has significant implications for business models across the financial services sector and will require further guidance in the legislative process.

Practical implications

What is clear is that COFI will require a fundamental reassessment of licensing across the financial sector. Both currently regulated and previously unregulated entities may fall within scope.

In anticipation of COFI’s implementation, financial institutions should begin:

• mapping their activities against the proposed licensing categories;
• assessing whether any group entities or service providers may require separate licences; and
• reviewing governance and operational structures to align with an activity-based regulatory framework.

Early preparation will be critical to managing the transition to COFI’s new licensing regime.

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South African companies often introduce Employee Share Ownership Plans (“ESOPs“) for a variety of reasons. Through an ESOP, workers acquire shares in the firm in which they are employed without incurring an upfront cash outlay, entitling them to dividends and/or capital gains in their employer. Structuring an ESOP gives rise to complex legal, tax, accounting, and industrial relations questions. In recent years, the provisions of the Competition Act 89 of 1998 (“Competition Act“) also come into play when ESOPs are introduced in the context of obtaining merger approval from South African competition authorities. In this context, a new study from the Competition Commission (“Commission“) deserves attention.

Publication of the Commission’s ESOP Impact Study

On 29 April 2026, the Commission published an impact study titled Employee Share Ownership Plans (ESOPs): An Analysis of Key Design Principles to Create Value for Beneficiaries and Firms (”Study”). The Study examines fifteen ESOPs implemented during the period FY 2019/2020 to FY 2022/2023. These ESOPs were mandated as merger conditions following the inclusion of section 12A(3)(e) into the Competition Act.

In summary, the Study evaluates the current design framework of ESOPs, assesses the financial implications of different funding models, and proposes recommendations intended to improve ESOP outcomes for beneficiaries and firms alike.

This article outlines the key findings and recommendations of the Study, with a view to assisting merging parties in understanding how the Commission is likely to approach the evaluation of proposed ESOPs in future merger proceedings.

Background

In 2019, various amendments to the Competition Act came into effect, including section 12A(3)(e) which is an explicit public interest ground relating to the spread of ownership. In terms of that section, the Commission and the Competition Tribunal (“Tribunal“) must, when evaluating a merger on public interest grounds, consider the effect the merger will have on the promotion of a greater spread of ownership, in particular, the increase in levels of ownership by historically disadvantaged persons [1] and workers in firms in the market.

Where the Commission or Tribunal finds that a merger does not adequately achieve this, for instance, where a proposed merger would result in a dilution of existing Broad-Based Black Economic Empowerment (“B-BBEE“) shareholding, it may require an ESOP to be established in one or more of the merging parties or the merged entity.

Key Findings

1. Design principles

When a merger condition requiring an ESOP is indicated, the Commission currently provides merging parties with a template outlining key ESOP design principles. In addition, guidance on ESOPs can be found in the Commission’s 2024 Revised Public Interest Guidelines which provide that an ESOP must hold a minimum range of 5% to 10% of the equity of a merging party or merged entity and must represent a broad base of workers – as opposed to a few highly skilled workers. The Study found that while the current template addresses certain fundamental elements, it leaves considerable design scope to the implementing firm – a discretion which can materially affect both the extent to which workers benefit and the cost to shareholders of implementing the ESOP.

The Study also found that ESOP beneficiaries frequently lack a clear understanding of how ESOPs function, and that beneficiary-nominated trustees often lack board representation and fiduciary competencies needed to meaningfully represent workers’ interests.

2. Funding and financial sustainability

A significant concern identified by the Study relates to the prevalent ESOP funding model. Of the fifteen ESOPs examined, eleven were funded through notional vendor finance (”NVF”). Of those eleven, interest was charged on the “debt” in respect of six of the ESOPs.

Where an ESOP is funded through NVF or a cash loan, the ESOP incurs a debt that must be settled over time. When the firm declares a dividend, the portion attributable to the ESOP’s shareholding is not paid in full to beneficiaries; instead, it is split between a payment to beneficiaries (also known as a “trickle dividend”) and a payment towards the outstanding debt. The ratio of this split varies among ESOPs: some allocate a higher portion to debt repayment with a smaller amount distributed to beneficiaries, or vice versa. The trickle dividend ratio is therefore a critical design variable – one that directly affects both the speed at which the debt is repaid and the quantum of income beneficiaries receive in the interim.

The Study found interest-bearing funding models to be especially problematic given that NVF, by its very nature, is a notional loan rather than an actual cash loan. Consequently, the charging of interest on an NVF debt is, in the Commission’s view, not warranted.

Since ESOPs funded with interest-bearing debt typically rely on dividends declared by the firm to service that debt, the Study found that, in most cases, dividends received by the ESOP are insufficient to cover the full interest charge for a year, resulting in the capital loan amount not being reduced. In the instance when no dividend is declared at all, the debt accumulates perpetually. In both scenarios, beneficiaries receive little to no dividend income. The implication, according to the Study, is that there is a gap between the transformative policy intent of ESOPs and their current outcomes.

The Study’s Recommendations

1. Financing the ESOP

The Study recommends that interest should not be charged on NVF as it makes ESOPs financially unsustainable. It further recommends that where discounts (ordinarily offered in the open market) and favourable terms to purchase shares offered as part of employer executive incentive schemes are available, similar discounts and incentives should be extended to the purchase price of the ESOP’s shareholding.

The Study explains that discounts would reduce the initial value of the ESOP debt. The Study identifies four categories of discounts that should be considered: (i) a minority discount (to compensate for the lack of control an ESOP has, given its small shareholding in the firm); (ii) a marketability discount (applicable to private firms to compensate the ESOP for its inability to swiftly convert shares into cash and for incurring administrative costs when doing so); (iii) a lock-in period discount (this relates to the number of years workers would be locked into the ESOP and restricted from selling or transferring ESOP shares to parties outside the firm); and (iv) a discount reflecting the B-BBEE points gained by the firm from having an ESOP as a shareholder.

The Study illustrates, through a series of financial scenarios, the impact that different funding approaches can have on both the value of an ESOP’s debt and the dividend income received by beneficiaries over time. The modelling suggests that where interest-free funding is combined with discounting of the purchase price and actual annual payment of dividends, beneficiaries are more likely to receive meaningful dividend income, as debt is reduced more rapidly under such conditions.

2. Proposed mandatory design principles

The Study recommends that the following design elements be expressly included and specified in ESOPs –

• a specified implementation date;
• in respect of the structure of the ESOP, it must stipulate whether it will be established as a trust or a company. In either case, the ESOP should be established as a unitised structure whereby qualifying workers receive units rather than directly holding shares in the firm. The percentage shareholding to be held by the ESOP in the merging party or merged entity at the implementation date must also be specified;
• workers must not be required to pay to participate in the ESOP (i.e. merging parties must cover the costs associated with the establishment of the ESOP);
• the funding model must be specified (NVF, cash loan or full grant/donation) as well as the trickle dividend ratio;
• in respect of governance, the ESOP employee representatives should be entitled to nominate a director to the board of the firm in which the shares are held. Furthermore, the Study recommends that the ESOP, if structured as a trust, should appoint trustees (individuals nominated by the beneficiaries and the firm) to manage and administer the trust on behalf of the beneficiaries. The ESOP trustee composition should consist of either an equal number of beneficiary and firm-nominated trustees or, a majority of beneficiary-nominated trustees. Additionally, any costs associated with the operation of the board of trustees should be borne by the merged entity;
• the qualifying criteria for participation, such as the number of years worked and/or employee grade should be stipulated (with the exclusion of top/senior management of the firm), including the treatment of “bad leaver” events (e.g. resignations or dismissals) which would result in beneficiaries ceasing to participate in the ESOP;
• the participation benefits (e.g. dividends and/or capital gains) which beneficiaries can expect to receive should be clearly set out;
• mandatory training should be provided for beneficiaries, at no cost to the workers, covering the functioning of the ESOP, the terms of the ESOP trust deed and the tax implications of dividends received;
• more detailed legal and financial training should be provided for all ESOP trustees (at no cost to workers) in respect of the operation of the ESOP; and
• finally, a dispute resolution mechanism should be included to deal with potential disagreements between the merging parties and any independent legal or financial experts in relation to the reasonableness of fees/costs.

While the proposed design elements are more extensive than the Commission’s current template, they are less prescriptive to some extent. [2]

3. Design principles to be determined in consultation with workers

If an ESOP is anticipated, the Study recommends that the following design principles are determined in consultation with Workers, Worker Forums or Trade Unions before the merger is notified to the Commission. This is to prevent the ESOP being designed entirely by the parties with no worker input.

These include the duration of the ESOP (evergreen, buyback or hybrid), distribution of the trickle dividend, the class of shares to be issued, and the placement of the ESOP at either holding company or subsidiary level.

Duration of the ESOP

Duration is one of the most consequential design choices for an ESOP, as it determines how long the scheme will be in existence and whether beneficiaries will receive dividends, capital gains, or both. The Study identifies three duration models but does not recommend a particular one:

• An evergreen model. This model is intended to operate indefinitely, allowing new workers to continuously participate as they meet the qualifying criteria. While beneficiaries receive a steady stream of dividend income, they do not benefit from any appreciation in the value of the shares owned by the ESOP.
• A buyback model. This model, by contrast, operates for a fixed period – typically five years – after which the firm repurchases the shares and the ESOP is dissolved. This model allows beneficiaries to receive dividends during the life of the scheme and capital gains at the point of buyback.
• A hybrid model. This model combines elements of both the evergreen and buyback models. Under this model, a portion of the ESOP shares is bought back by the firm after a certain period, with the proceeds used to settle the outstanding debt. The remaining shares are then retained under an evergreen model, allowing the beneficiaries to continue receiving dividends on that portion of the ESOP’s shareholding going forward.

Phantom ESOP schemes

Merging parties should be aware that the Commission’s focus, both in the Study and in the Revised Public Interest Guidelines, is specifically on equity-based ESOPs that confer actual share ownership on worker beneficiaries. The Study itself expressly states that it does not evaluate alternative structures such as profit sharing schemes.

Under a phantom scheme, employees receive notional or ‘phantom’ shares that track the value of real shares and provide financial benefits linked to share price performance, but do not constitute actual share ownership. Employees therefore do not become shareholders in the firm, do not acquire voting rights, and do not receive dividends in the conventional sense.

Whilst phantom schemes have been employed in at least two cases that we are aware of, it is not clear that the Commission will regard them as meeting the requirements of section 12A(3)(e) of the Competition Act.

Placement of the ESOP

The Study recommends that positioning the ESOP at the operating subsidiary level may better incentivise workers, as their contribution is directly linked to that entity’s profitability. However, where the subsidiary is not performing well, placement at corporate group level may be preferable to ensure beneficiaries can still receive dividends if the group is profitable overall, despite the subsidiary’s poor performance.

Leavers from the ESOP

The Study further recommends that the definition of “good leaver” and “bad leaver” be determined in consultation with workers. In particular, firms should consider paying exiting beneficiaries regardless of their reason for exiting the firm. Beneficiaries who are retrenched, pass away, retire, or are permanently incapacitated or disabled should be treated as good leavers and receive 100% of their entitlement, while workers who resign or exit pursuant to a mutual separation agreement (commonly referred to as “bad leavers”) should receive a pro rata payment. Notably, the Study does not prescribe the applicable pro rata percentage for bad leavers, leaving this to be determined in consultation with workers.

Alternative debt-reduction mechanisms

Lastly, the Study recommends that the ESOP consider alternative mechanisms to reduce the ESOP’s debt such as (i) the purchase of additional shares in the firm which can be sold at a later stage when share prices appreciate; (ii) the purchase of shares in other companies from which income can be derived, or (iii) the undertaking of investments such as exchange-traded funds and fixed income investments.

Conclusion

The Study is the Commission’s most detailed and comprehensive pronouncement to date on what constitutes an effective and sustainable ESOP from a competition enforcement perspective. While the Study’s recommendations are not legally binding, the Study provides a clear signal of the standard against which the Commission is likely to measure proposed ESOP conditions in future mergers. Merging parties that engage with ESOPs as a substantive ownership remedy to comply with section 12A(3)(e) of the Competition Act, and structure them in accordance with the principles outlined in the Study, will be better placed to achieve merger approval efficiently.

Should you require advice on the structuring and implications of an ESOP, please feel free to contact any of the members of the Werksmans Competition Practice Area.

The post How the Competition Commission’s ESOP impact study may shape future mergers appeared first on Werksmans Attorneys.

In this article series, we take a deep dive into the South African Conduct of Financial Institutions (COFI) Bill — a major financial sector regulatory reform – one theme at a time.

COFI was drafted in conjunction with the Financial Sector Regulation Act (FSRA), the two pillars of the Twin Peaks regulatory reform. The Twin Peaks regulatory reform is a response to financial system weaknesses identified by the 2008 Global Financial Crisis, such as the systemic risks of large insurers and inappropriate market conduct practices.

The FSRA has already been implemented. The FSRA introduced the Twin Peaks regulatory framework, bringing into existence two regulators for the industry. The first regulator is the Prudential Authority (PA) responsible for the prudential regulation of financial institutions, while the second is the Financial Sector Conduct Authority (FSCA) responsible for regulating market conduct.

COFI represents a major overhaul of how financial institutions will be regulated in South Africa. Currently, different financial institutions are regulated by different legislation. COFI will involve shifting to a harmonised, principles-based conduct regime focused on customer outcomes, transparency and inclusion. COFI also provides for a single licensing and supervision framework and stronger enforcement and standards across the financial sector. Its implementation will unfold over several years and reshape regulatory expectations for financial institutions and consumers alike.

National Treasury has indicated that COFI will be finalised in 2026. COFI has recently been adop­ted by Cab­inet for sub­mis­sion to Par­lia­ment.

Purpose and Application: Part 1

In this article, we consider the scope and application of COFI.

Application

COFI applies to all “financial institutions”, a term defined broadly to include banks, insurers, retirement funds, investment managers, collective investment schemes, credit providers, payment service providers and a wide range of other entities involved in the provision of financial products or services.

Critically, COFI is not concerned with the form of an institution, but with the activities it performs. In other words, under COFI, it is not what you are, but what you do that counts.

Purpose and regulatory approach

The purpose of COFI is to strengthen market conduct regulation across the financial sector by introducing a single, overarching legal framework governing how financial institutions behave and treat customers. To achieve this, COFI seeks to eliminate the current fragmented conduct regime, which is spread across multiple, and often overlapping, pieces of legislation. In its place, COFI introduces a harmonised, activity-based framework that applies consistently across the financial sector.

Breadth of application

COFI’s wide scope is a deliberate feature. By applying common conduct standards across all financial activities, the framework aims to ensure that customers receive consistent levels of protection, regardless of the type of institution with which they engage.

However, this breadth has also attracted meaningful industry concern. Stakeholders have noted that COFI’s application to a wide range of financial activities may extend regulatory oversight into areas that were previously lightly regulated or unregulated, for example, the introduction of a licensing category for “corporate advisory services”, which appears to capture activities typically associated with investment banking — including the arrangement of debt and equity issuances and advisory services in relation to mergers and acquisitions. While the framework appears to contemplate the ability for certain counterparties to “opt out” of protection, this nonetheless represents a significant expansion of regulatory scope into activities involving sophisticated, non-retail clients. This raises a broader policy question as to whether COFI’s extension into these areas is appropriately calibrated, given that such clients are not traditionally regarded as vulnerable.

A further concern relates to the replacement of sector-specific legislation (such as FAIS) with a single, cross-sectoral framework. While harmonisation reduces fragmentation, it may also obscure important differences between sectors and business models.

COFI incorporates the principle of proportionality, recognising that regulatory requirements should be applied in a manner that is appropriate to the size, nature and complexity of a financial institution. In theory, this should ensure that smaller providers — such as independent financial advisors — are not subject to the same expectations as large, complex institutions. In practice, however, the application of proportionality remains uncertain in certain respects. COFI makes use of concepts such as “governing body” and “corporate culture”, which are not always clearly defined and may not translate easily to smaller firms or new market entrants. This creates a degree of ambiguity as to how such entities are expected to comply with COFI’s conduct expectations.

Practical implications

COFI’s broad scope means that its impact will be felt across the entire financial sector, including by entities that may not currently be subject to comprehensive conduct regulation.

Given the scale of reform, COFI will be implemented on a phased basis. Transitional arrangements will allow financial institutions time to align with the new framework, including the move to activity-based licensing. That being so, in anticipation of COFI’s implementation, financial institutions should assess whether their activities fall within the scope of COFI and map existing products, services and business lines to the activity-based framework.

Importantly, entities that are not currently regulated — or that are only lightly regulated — should consider whether COFI will introduce new licensing and compliance obligations.

While there is uncertainty as to how certain aspects of COFI will be implemented in practice, what is clear is that COFI represents a material expansion in both the scope and depth of conduct regulation.

Early engagement and preparation will be key to navigating this transition.

The post Mind the Conduct: A Guide to COFI – Part 1: Purpose and Application appeared first on Werksmans Attorneys.

Many businesses assume that once a customer has consented to direct marketing, they may continue contacting that customer unless the consent is expressly withdrawn. South Africa’s updated direct marketing regime may challenge this assumption. Where a customer has expressly consented to receive direct marketing but later registers a pre-emptive block on the National Opt-Out Registry (the “Registry”), businesses face a difficult question: should the earlier consent or the later Registry entry prevail? The question is becoming increasingly important following recent amendments to the Consumer Protection Act Regulations, 2011 (the “CPA Regulations”), which operationalise the Registry and which the National Consumer Commission (the “NCC”) has indicated will commence practical registration and implementation processes in July 2026. South African law does not yet clearly prescribe a hierarchy between prior express consent and subsequent pre-emptive block in every scenario. Pending clearer regulatory or judicial guidance, the issue should be managed as both a legal interpretation question and a data-governance risk.

Why this matters operationally

For many companies, consent and opt-out records are fragmented across business units, legacy platforms, outsourced call centres, CRM systems, loyalty databases, and third-party lead-generation arrangements.

A customer’s marketing status may be recorded in multiple parallel datasets reflecting historical contractual consent, marketing preferences, channel-specific opt-outs, POPIA objections, customer‑service suppressions, and external opt-out registry requirements. (For ease of reading, this article refers generally to “customers”, while using “consumers” where the CPA is being discussed and “data subjects” where POPIA is being discussed.) One system may show that a customer previously consented to direct marketing, while another may show a later channel-specific opt-out.

Businesses will therefore need rules for dealing with conflicts between earlier consent, later Registry-based opt-outs, POPIA objections and channel-specific marketing campaigns. If a customer appears on the Registry, but remains marked as having “consented” to direct marketing, which instruction will prevail? How should the business treat customers who gave prior express, and sometimes written, consent before registering a pre-emptive block on the Registry? How should customer databases be cleansed where consent records, channel-specific opt-outs, POPIA objections and Registry suppressions conflict? How should third-party lead-generating databases be assessed before use? What audit trails must exist to demonstrate that the business has a lawful basis for sending direct‑marketing communication?

Until this hierarchy is clarified, direct marketers will need to implement a clear governance position that can be applied across systems, channels, and third-party data sources.

The CPA position

Section 11 of the CPA, headed “The Right to Restrict Unwanted Direct Marketing”, prescribes consumers’ rights in respect of direct marketing. In terms of this section, consumers have the right to refuse direct marketing, require that it be discontinued, or pre-emptively block unwanted marketing. The amended CPA Regulations give practical effect to this by recognising a pre-emptive block registered on the Registry established by the National Consumer Commission (“NCC”). This section also prohibits direct marketing to any person who has requested that direct marketing be discontinued or has registered a pre-emptive block.

In terms of the CPA Regulations (as amended), a “pre-emptive block” means “registering a block on the opt-out registry established by the Commission … to prevent any unwanted electronic communication from direct marketers”.

The use of the word “unwanted” is notable. It leaves room for the argument that direct marketing sent within the scope of a consumer’s specific, informed, and current consent is not “unwanted” direct marketing. On that view, a later Registry entry should not automatically override all prior or subsequent consent in every circumstance. However, this interpretation is not risk-free and would have to be weighed against the express prohibitions in the amended CPA Regulations.

The amended CPA Regulations strongly suggest that pre-emptive blocks are intended to have practical force. The CPA Regulations expressly prohibit a direct marketer from marketing any goods or services directly to any consumer who has registered a pre-emptive block. They also oblige a direct marketer to remove, from its direct‑marketing databases, the people who have registered pre-emptive blocks. The overall structure of the CPA regime appears designed to enable a consumer to (a) block direct marketing from a particular direct marketer by sending an opt-out message to that direct marketer; or (b) block direct marketing without having to opt out repeatedly from multiple marketers individually by registering a pre-emptive block on the Registry.

The Registry is therefore intended to create a centralised mechanism through which consumers can broadly signal that they do not wish to receive unwanted direct‑marketing communications. This is where the consent issue becomes significantly more complicated. Neither the CPA nor the amended CPA Regulations expressly or comprehensively address whether express consent for direct marketing can override a subsequent Registry entry.

The omission is significant because many organisations already rely on broad contractual or digital consent mechanisms. Consumers routinely “agree” to receive direct-marketing communications when opening accounts, downloading apps, entering competitions, or subscribing to services.

This lack of clarity is therefore not merely theoretical. It creates a real compliance, governance, and evidentiary challenge for businesses, especially those with large customer databases and legacy marketing systems.

The POPIA position

POPIA does not resolve the issue. In broad terms, section 69 of POPIA regulates direct marketing by means of unsolicited electronic communications and generally requires consent unless the existing-customer soft opt-in applies.

POPIA also recognises ongoing control by data subjects: data subjects who have provided prior consent may withdraw their consent at any time. Data subjects may also object to the processing of their personal information for direct‑marketing purposes.

POPIA therefore regulates the lawful processing of personal information, while the CPA regulates unwanted direct marketing from a consumer-protection perspective. Although the two regimes overlap substantially, in practice, they regulate different things and do not fit together neatly. It is therefore unclear how the exercise of rights under one statute affects rights and obligations under the other.

POPIA adds another layer to the difficult questions that arise under the CPA. It is unclear what role pre-emptive blocks under the CPA will play under the POPIA framework. Will registration on the Registry be treated as a withdrawal of earlier direct-marketing consent, an objection to processing, or a separate CPA-based suppression instruction?

Key unresolved questions

The current interaction between the CPA and POPIA creates several unresolved questions that affect business operations, including:

• Whether a pre-emptive block automatically constitutes withdrawal of prior consent.
• Whether a marketer may continue relying on consent obtained before a Registry entry.
• Whether a later and more specific consent can revive marketing after registration.
• Whether the answers to these questions differ for existing customers and prospective customers.

From a governance perspective, this creates a difficult compliance position for businesses attempting to design defensible direct marketing frameworks in advance of likely enforcement activity.

The regulatory position is also split across regimes. The CPA framework and the Registry are administered by the NCC and are aimed at addressing the consumer’s right to restrict unwanted direct marketing.  POPIA, on the other hand, regulates the processing of personal information and places specific limits on unsolicited electronic direct marketing. A single marketing campaign may therefore raise both consumer-protection and data‑protection issues, particularly where internal consent records, POPIA objections and pre-emptive block‑based suppressions are not aligned.

The timing and nature of the consent may also matter. Consent obtained before a customer registers a pre-emptive block may become difficult to rely on if the later Registry entry is treated as a broader suppression instruction. Consent obtained after registration may present a different question, particularly where it was recently obtained, is channel-specific and auditable. The law does not yet provide a comprehensive answer to this hierarchy issue, which is why businesses should distinguish between historical consent, post‑registration consent and broad bundled consent captured through standard customer journeys.

Comparative international frameworks indicate that laws often expressly clarify whether and when prior consent operates as an exception to do‑not‑contact registry protections. Certain countries, such as Canada, Australia, and the United States, expressly recognise consent-based exceptions to do‑not‑contact restrictions, although the scope and operation of those exceptions differ materially across regimes. The amended CPA Regulations currently do not provide equivalent clarity regarding the relationship between prior consent and later pre-emptive‑block based suppression rights.

What should you do in the meantime?

Pending clarification of the hierarchy between direct-marketing consent, pre-emptive blocks and POPIA opt-outs, businesses should consider adopting the following controls:

1. Screen marketing databases against the Registry before campaigns, and repeat that screening monthly in line with the amended CPA Regulations.
2. Reconcile Registry matches against internal consent records, channel-specific opt-outs, POPIA objections, customer-service suppressions, and legacy marketing preferences.
3. Apply a default suppression rule where the customer appears on the Registry unless there is a properly documented and supportable basis for continuing to market to that customer within the relevant channel and scope.
4. Require exceptions to be approved and documented with reference to the wording, date, source, scope, and channel of the consent relied on.
5. Allocate responsibility for suppression management to a defined business owner supported by legal, compliance, marketing operations, and data governance, rather than allowing consent status to be managed inconsistently across marketing, sales, customer service, compliance, and outsourced call centre teams.
6. Treat third-party lead lists as high-risk data assets and do not use them unless the origin, wording, scope, date, and transferability of the relevant consent can be verified before use, and the data have been screened against the Registry and other applicable suppression requirements.
7. Retain an audit trail showing how conflicts between consent records, Registry status and POPIA objections were identified, escalated, and resolved.

Until clearer regulatory or judicial guidance emerges, businesses engaging in direct marketing may need to adopt more conservative suppression frameworks. In practice, this may require organisations to treat pre-emptive block-based suppression rights as potentially overriding historical consent records unless the business can demonstrate a well-documented and defensible basis for continuing to market within the relevant channel and scope.

The post Your customer consented to direct marketing – but can you still contact them after they have registered on the National Opt-Out Registry? appeared first on Werksmans Attorneys.

South African labour law is often discussed through the lens of employee protection. That is unsurprising. The Labour Relations Act, the Basic Conditions of Employment Act, and the raft of constitutional rights underpinning workplace regulation were all designed to address historical inequality and imbalance in the employment relationship. Yet, somewhere in the modern discourse, a dangerous misconception has emerged: that employers are little more than passive participants in their own businesses, stripped of the ability to manage risk, enforce standards, and protect commercial sustainability.

That is not the law.

The modern employer retains extensive rights recognised by statute, contract, and the courts. Those rights matter. Without them, businesses cannot function effectively, workplaces become unmanageable, and ultimately jobs themselves are placed at risk.

At the centre of the employer’s rights framework lies a simple principle: employers are entitled to run their businesses efficiently, profitably, and safely. The Constitutional Court and Labour Appeal Court have repeatedly recognised that managerial prerogative remains a foundational component of labour law. While employers must exercise that prerogative fairly and lawfully, the law does not require employers to tolerate misconduct, underperformance, insubordination, incompatibility, operational inefficiency, or conduct that undermines trust.

Too often employers are advised as though every disciplinary process is merely an obstacle course designed to avoid litigation. That mindset fundamentally misunderstands the purpose of workplace discipline. Discipline is not punishment for punishment’s sake. It is a legitimate operational mechanism intended to preserve standards, accountability, and workplace order.

An employer has the right to expect honesty from employees. That principle remains one of the most strongly protected interests in South African labour jurisprudence. Courts consistently recognise that dishonesty strikes at the heart of the employment relationship because it destroys trust. Once trust is irreparably damaged, continued employment may become intolerable irrespective of the employee’s length of service or prior record.

Similarly, employers are entitled to demand acceptable performance standards. Poor work performance processes are not acts of victimisation. They are lawful mechanisms intended to assist employees to meet operational requirements. The law does not require employers to indefinitely carry employees who are unable or unwilling to perform at the required standard, provided that fair procedures are followed and reasonable assistance is offered.

The same applies to incompatibility and workplace harmony. Senior employees in particular occupy positions requiring collaboration, leadership, and strategic alignment. Where an employee creates conflict, undermines management, damages workplace cohesion, or becomes fundamentally incompatible with the organisation’s culture or leadership structure, employers are entitled to intervene. Courts have increasingly recognised incompatibility as a legitimate basis for dismissal where the employment relationship has become unsustainable.

Importantly, employers also have the right to protect confidential information, customer connections, intellectual property, and competitive advantage. In an era where employees can move between competitors with unprecedented ease, restraints of trade and confidentiality obligations remain critical commercial tools. Courts will not enforce unreasonable restraints, but they continue to uphold legitimate protections where proprietary interests are genuinely at risk.

Operational requirements dismissals are another area where employer rights are frequently misunderstood. Retrenchment is not unlawful merely because it is unpopular. Businesses are entitled to restructure operations, reduce costs, introduce technology, outsource functions, or redesign reporting structures in pursuit of sustainability and efficiency. The law requires meaningful consultation and procedural fairness — not business paralysis.

Perhaps most overlooked of all is the employer’s right to workplace safety and risk management. Employers carry statutory obligations under health and safety legislation, regulatory frameworks, and common law duties of care. Those obligations necessarily include the right to investigate misconduct, suspend employees where appropriate, restrict access to systems or sites, and take decisive action where operational or reputational risks arise.

There is also a growing trend in modern labour disputes where every managerial decision is framed as retaliation, victimisation, or constructive dismissal. Courts, however, continue to distinguish between genuine unlawful conduct and ordinary workplace management. Employees do not acquire immunity from accountability simply because grievances have been raised or protected disclosures have been made. Employers remain entitled to manage performance, discipline misconduct, and protect operational integrity, provided those actions are not motivated by ulterior or unlawful purposes.

None of this means employers are above the law. Far from it. Fairness remains the cornerstone of South African labour relations. But fairness is reciprocal. The employment relationship is not designed to operate exclusively for the benefit of one side.

Healthy workplaces depend upon balance. Employees are entitled to dignity, fairness, and protection from arbitrary treatment. Employers are equally entitled to accountability, productivity, loyalty, and operational stability.

The most effective organisations are not those paralysed by fear of litigation. They are those that understand their rights, exercise them consistently, and implement fair but decisive management practices.

The post Employers have rights too: Rebalancing the modern workplace appeared first on Werksmans Attorneys.

In September 2024, we published an article examining whether Government was aligned in its approach to enabling the rapid deployment of electronic communications networks and facilities, highlighting a persistent disconnect between national policy objectives and municipal implementation, particularly in the context of the Standard Draft By-Laws for Deployment of Electronic Communications Facilities (“Draft By-Laws“), gazetted on 24 February 2023. We identified several specific deficiencies in those By-Laws, including the undefined scope of “persons” to whom they apply (notwithstanding section 7 of the Electronic Communications Act’s (“ECA“) prohibition on providing services without a licence), the compounding of wayleave approval timelines to in excess of 90 working days, and the imposition of unclear ongoing charges under the proposed Municipal Land Use Agreements. We also noted that, despite national government’s stated commitment to rapid deployment, only three municipalities had incorporated the Draft By-Laws into their wayleave by-laws.

The publication of the Draft Policy Direction by the Minister of Communications and Digital Technologies in March 2026 (“Draft Policy”), followed by ICASA’s Draft Rapid Deployment Regulations (“the Regulations”) on 10 April 2026, signals a coordinated attempt to translate policy ambition into an operational regulatory framework. The Draft Policy had already directed ICASA to prescribe regulations addressing the manner, costs of and time within which a decision for access must be made, the implementation and publication of decisions made in terms of a dispute resolution procedure, and how reasonable compensation must be determined. The Draft Policy and the Regulations now seek to give detailed effect to those earlier directives.

A Shift from Policy Fragmentation to Regulatory Alignment

The Draft Policy explicitly gives effect to the 2023 National Policy on the Rapid Deployment of Electronic Networks and Facilities (“the National Policy“) by ensuring more efficient access to land, both public and private, for broadband infrastructure. This builds on the broader objectives of the SA Connect policy, which recognised that the lack of always-available, high-speed and high-quality bandwidth negatively impacts upon South Africa’s development and global competitiveness.

Importantly, the Policy Direction does not operate in isolation. It directs ICASA to develop a regulatory framework that addresses key structural inefficiencies, including unnecessary duplication of infrastructure, inconsistent access to public servitudes and infrastructure, the absence of a centralised infrastructure database, and the lack of effective dispute resolution mechanisms. ICASA’s Draft Regulations are therefore the operationalisation of the Draft Policy, providing the procedural detail that has historically been absent.

Standardisation of Access and the End of Informal Deployment Practices

A significant contribution of the Draft Regulations is the formalisation of land access procedures under section 22 of the ECA, which empowers ECNS licensees to enter upon any land, construct and maintain electronic communications networks or facilities, and to alter or remove their electronic communications facilities, with due regard to applicable law and the environmental policy of the Republic. As interpreted by the Constitutional Court in City of Tshwane Metropolitan Municipality v Link Africa (Pty) Ltd and Others [2015] ZACC 29, the right under section 22 entitles licensees to select and access premises, provided this is done in a civilised and reasonable manner, including giving reasonable notice and consulting with the property owner. Where licensees previously relied heavily on these statutory rights of entry — often resulting in disputes, as is evident from recent cases such as Metrofibre Networks (Pty) Ltd v Independent Communications Authority of South Africa and Others [2024] ZAGPPHC 919 (11 September 2024) – the Regulations now impose a structured process requiring prior approvals from relevant authorities, mandatory consultation with landowners and affected communities, and the conclusion of an access agreement governing entry, installation, and compensation.

This reflects a deliberate move towards procedural fairness and transparency, addressing one of the key criticisms in our earlier analysis, namely, the absence of uniform engagement standards. Practically, the procedures for approval remain a concern at local authority level. Section 24 of the ECA requires ECNS licensees to give 30 working days’ notice to any local authority or person owning or responsible for the care and maintenance of any street, road or footpath. As we noted in our earlier article, the cumulative effect of obtaining prior approvals from all relevant authorities before submitting an application could extend the effective approval period to in excess of 90 working days, a concern which remains relevant under the new framework.

Infrastructure Sharing and the Move Toward a Coordinated Network Economy

The Draft Policy places particular emphasis on reducing duplication of infrastructure, including by encouraging access to existing facilities and public infrastructure. This is reinforced in the Draft Regulations through obligations to cooperate with other licensees and provisions for trench sharing and co-build arrangements, marking a transition from a competitive build model to a more coordinated, efficiency-driven deployment environment.

The Emergence of a National Infrastructure Database

A central pillar of both the Draft Policy and the Draft Regulations is the establishment of a centralised Geographic Information System (GIS) database. The Draft Policy envisages a database populated by licensees with information on new and existing infrastructure, while the Draft Regulations go further by prescribing detailed data submission requirements, bi- annual reporting obligations, and the inclusion of forward-looking investment plans. A significant development. The absence of reliable infrastructure data has historically contributed to repeated trenching, accidental damage to existing networks, and inefficient allocation of resources. The GIS framework introduces a foundation for evidence-based regulation and coordinated planning, aligning South Africa with international best practice.

Reconfiguring Property Rights Through Compensation and Process

The Draft Policy’s emphasis for reasonable compensation to landowners where deployment activities cause damage, aligns with the National Policy requirement that compensation charged by property owners ought to be reasonable, proportionate to the disadvantage suffered, and may not enrich the property owner or exploit the licensee. Consistent with the ECA, which provides that licensees are only obligated to pay the reasonable expenses incurred as a consequence of the construction, alteration or removal of electronic communications facilities and networks, the Draft Regulations introduce a structured compensation framework requiring good faith negotiations, consideration of market value and demonstrable loss, and compensation for both physical damage and loss of use of land.

Notably, ICASA does not prescribe compensation amounts, instead facilitating a process aimed at achieving a “just and equitable balance” between the interests of licensees and landowners. This approach reflects a careful constitutional balancing exercise recognising the importance of broadband infrastructure while safeguarding property rights.

Dispute Resolution

Both the Draft Policy  and the Draft Regulations recognise the absence of effective dispute resolution as a major impediment to deployment. The Draft Policy  contemplates early declaration of disputes, possible suspension of deployment activities, and referral of compensation disputes to courts. The Draft Regulations give effect to this through a tiered dispute resolution framework requiring negotiation, mediation within a prescribed period, and escalation to ICASA, arbitration, or courts. This provides much-needed clarity and predictability, although the potential suspension of deployment pending dispute resolution could introduce delays if not carefully managed.

Persistent Challenges: Municipal Alignment and Implementation Risk

However, notwithstanding these advances, the Draft Policy itself acknowledges that only a fraction of municipalities have adopted the Draft By-Laws. Inconsistent wayleave processes at local authority level remain a significant obstacle. The success of the Draft Regulations will therefore depend heavily on municipal cooperation, alignment of by-laws with the national framework, and the administrative capacity of local authorities. Absent this alignment, there remains a risk that regulatory standardisation at national level may not fully translate into practical efficiency on the ground.

Conclusion: A Turning Point—But Not Yet a Resolution

The Draft Policy and Draft Regulations represent the most comprehensive attempt to date to address the structural barriers to rapid deployment in South Africa. They reflect a clear shift toward procedural standardisation, coordinated infrastructure planning, and balanced protection of property rights.

However, the ultimate question remains one of implementation. The framework is now considerably more coherent, but its success will depend on whether it can overcome the same challenges that have historically hindered rapid deployment, particularly at municipal level. What is clear, however, is that Government is now moving in a more unified direction. The disconnect we previously identified may not yet be fully resolved, but it is, at the very least, being actively addressed.

The post From policy direction to regulation: Is South Africa finally achieving rapid deployment? appeared first on Werksmans Attorneys.

South Africa’s Minister of Trade, Industry and Competition has, in a notice, published revised merger notification thresholds and filing fees under the Competition Act 89 of 1998 (“Competition Act“), effective 1 May 2026. The updated thresholds raise the turnover and asset values that determine whether a transaction is classified as a small, intermediate, or large merger, meaning that some deals which previously required mandatory notification may now fall below the filing threshold. At the same time, the filing fees payable on intermediate and large merger notifications have been increased. These changes will be relevant to any business contemplating M&A activity with a South African dimension from 1 May 2026 onwards.

What has changed?

Merger notification thresholds

The Competition Act requires parties to notify the Competition Commission (“Commission“) of mergers that meet prescribed turnover and asset thresholds. These thresholds have been adjusted upwards as set out in the table below; the underlying calculation methodology, which tests the combined position of the acquiring and transferred firms as well as the position of the transferred firm alone, measured “in, into or from” the Republic, remains unchanged.

In broad terms, the classification works as follows:

• a transaction that falls below either limb of the lower threshold is a small merger and is not subject to mandatory notification;
• a transaction that meets both limbs of the lower threshold but falls below either limb of the higher threshold is an intermediate merger, notifiable to the Commission; and
• a transaction that meets both limbs of the higher threshold is a large merger, notifiable to both the Commission and the Competition Tribunal (“Tribunal“).

Filing fees

The fees payable on filing a merger notification have also been increased, as follows:

Effective date

Despite the notice being published on 8 May 2026, both the revised thresholds and the new filing fees take effect retrospectively from 1 May 2026. The notice does not include any transitional provisions, so the new regime will apply to notifications lodged on or after that date.

Practical implications for clients

Notification obligations

The increase in the lower thresholds is substantive, the combined threshold has risen from R600 million to R1 billion, and the transferred firm threshold has doubled from R100 million to R200 million. Transactions that would previously have been classified as notifiable intermediate mergers may now fall below the lower threshold and qualify as small mergers exempt from mandatory notification. Conversely, the uplift in the higher thresholds from R6.6 billion to R9.5 billion (combined) and from R190 million to R280 million (transferred firm) means that some transactions previously classified as large mergers may now fall into the intermediate category, with corresponding procedural and timing benefits.

Deal structuring and timetabling

For transactions currently in the pipeline, parties should reassess their merger control analysis against the new thresholds. Where the revised thresholds affect a deal’s classification, there may be implications for whether the transaction requires notification to the Commission, alternatively notification to the Commission and approval by the Tribunal, the anticipated review timeline, and the overall transaction timetable.

But more important at this moment in time, since the new thresholds came into operation on 1 May 2026, filing fees could very well be refundable or deal teams should expect an amended invoice!

Transaction budgets

The increased filing fees, R220,000 for an intermediate merger and R735,000 for a large merger, should be factored into transaction cost estimates for deals expected to be notified from 1 May 2026 onwards.

Retained call-in power

It is important to remember that even where a transaction falls below the mandatory notification thresholds and is classified as a small merger, the Commission retains the power to require notification within six months of implementation. Parties to transactions that narrowly fall below the new thresholds should continue to assess whether a voluntary notification may be prudent.

Contact us

If you have any questions about how these changes may affect a planned or ongoing transaction, or if you would like assistance with a merger notification assessment, please contact a member of our competition team. We would be happy to assist.

The post South Africa: Merger Notification Thresholds and Filing Fees Increase from 1 May 2026 appeared first on Werksmans Attorneys.

A recent judgment handed down by Nyathi J in Maralco Business Advisors CC t/a Maralco Plant Services v GMK Civils Proprietary Limited [1], serves as an important reminder that liquidation proceedings are not a debt-collection mechanism where the underlying indebtedness is genuinely disputed.

The matter concerned an application for the final winding-up of GMK Civils Proprietary Limited on the basis that the company was allegedly unable to pay its debts as contemplated in section 344(f), read with section 345(1)(c), of the Companies Act 61 of 1973. The applicant alleged that the respondent was indebted to it in the amount of R817 994.50 arising from a plant rental facility allegedly concluded on a thirty-day basis and supported by a certificate of balance.

The respondent opposed the application on several grounds. Central to its defence was that its sole director neither concluded nor authorised the alleged facility agreement relied upon by the applicant. The respondent further contended that, even on the applicant’s own version, the alleged agreement was void for uncertainty because it failed to record an essential term, namely the rental rates or a mechanism by which such rental rates could be determined. On this basis, the respondent argued that the invoices relied upon by the applicant could not establish the indebtedness alleged.

The Court ultimately dismissed the winding-up application with costs, reaffirming the long-established principle set out in Badenhorst v Northern Construction Enterprises Proprietary Limited [2], namely that liquidation proceedings should not be used to enforce payment of a debt that is bona fide disputed on reasonable grounds.

Importantly, Nyathi J did not merely accept a generic allegation of dispute. The Court carefully analysed the nature of the disputes raised and found that they constituted substantive contractual disputes incapable of proper determination in motion proceedings seeking liquidation relief.

The applicant relied heavily on a certificate of balance clause as prima facie proof of indebtedness. However, the Court drew an important distinction between proof of indebtedness and proof of liability itself. Nyathi J held that while a certificate of balance may constitute prima facie proof according to its terms, it cannot conclusively establish liability where the validity and enforceability of the underlying agreement are themselves credibly challenged.

In particularly strong language, the Court held that “a certificate cannot bootstrap validity”. This is a significant statement for commercial litigants and insolvency practitioners alike. Certificate of balance clauses are routinely relied upon in commercial litigation and insolvency proceedings, particularly in matters involving facilities, running accounts, or credit agreements. The judgment makes it clear that the evidentiary value of a certificate remains dependent on the existence of a valid contractual foundation.

The Court further held that the respondent had raised a bona fide dispute on reasonable grounds regarding both authority and certainty of essential terms. In relation to authority, the respondent’s sole director squarely denied signing or authorising the agreement. Although the applicant argued that the documents emanated from the respondent’s offices, that services had been rendered and accepted, and that part-payments had been made from time to time, the Court held that these considerations did not permit the respondent’s version to be rejected on the papers.

Nyathi J specifically referred to the principles set out in Plascon-Evans Paints Ltd v Van Riebeeck Paints [3] and held that the respondent’s version could not be rejected as far-fetched or untenable.

The Court also rejected the applicant’s reliance on section 20(7) of the Companies Act 71 of 2008, which permits a person dealing with a company in good faith to presume that the company has complied with all formal and procedural requirements. While the Court accepted that this may be a relevant consideration at the level of “commercial probability”, it nevertheless found that the issue of authority remained genuinely disputed on the papers.

Equally significant was the Court’s treatment of vagueness and certainty of contractual terms. The respondent argued that the alleged agreement failed to specify either a fixed rental amount or an ascertainable mechanism by which the rental could be determined. The Court found that this was not a contrived defence. Instead, it constituted “a substantive contractual contest unsuited to motion liquidation proceedings”.

The judgment repeatedly emphasises the limited role of winding-up proceedings in the resolution of contractual disputes. Nyathi J noted that winding-up proceedings are not designed to resolve material disputes concerning the existence of indebtedness and reaffirmed that where a debt is bona fide disputed on reasonable grounds, the creditor’s remedy lies in action proceedings.

Perhaps the most striking passage in the judgment appears in paragraph 19, where the Court stated that contested issues of authority, contract formation, and essential terms should be ventilated by way of action proceedings “with oral evidence and discovery, not the blunt instrument of corporate death by winding-up”.

That phrase captures the policy rationale underpinning the Badenhorst principle. Liquidation proceedings carry severe commercial consequences and are not intended to operate as procedural leverage in ordinary commercial disputes.

Notably, however, the Court stopped short of criticising the applicant’s conduct as abusive or vexatious. Nyathi J accepted that the applicant had relied on a documentary trail, invoices, and a certificate of balance, “often invoked in commerce”. The Court accordingly refused to grant punitive costs and instead ordered costs on the ordinary party-and-party scale.

The judgment serves as a timely reminder that creditors considering liquidation proceedings must carefully assess the underlying contractual foundation of their claims before invoking the insolvency process. Disputes relating to authority, contract formation, certainty of essential terms, or enforceability may well render liquidation proceedings inappropriate, even where invoices have been rendered, services performed, and partial payments made.

For insolvency practitioners and commercial litigants alike, the judgment is a reaffirmation that the Badenhorst principle remains firmly embedded in South African insolvency law, and that the courts will continue to guard against the use of winding-up proceedings as a substitute for ordinary action proceedings.

[1] Maralco Business Advisors CC t/a Maralco Plant Services v GMK Civils (Pty) Ltd (2026) ZAGPPHC (20 April 2026).

[2] Badenhorst v Northern Construction Enterprises (Pty) Ltd 1956 (2) SA 346 (T).

[3] Plascon-Evans Paints Ltd v Van Riebeeck Paints[3] (Pty) Ltd 1984 (3) SA 623 (A).

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