South Africa’s growing legislative landscape is growing rapidly to foster a more conducive environment for business and investment. Recently, President Cyril Ramaphosa signed significant amendments to the Companies Act of 2008, the Climate Change Act, and the Public Procurement Act into law. These reforms are designed to streamline operations, enhance transparency, and promote sustainability. In this post, we explore these key changes and how they can benefit your business.
Ease of Doing Business
The Companies Amendment Act is a landmark reform that simplifies company law, making it clearer, more user-friendly, and less burdensome for businesses. This change is vital for the efficient and effective conduct of the domestic economy, as well as for attracting foreign investment. By reducing bureaucratic red tape, the Act aims to foster a more conducive environment for businesses to thrive.
Corporate Transparency
One of the most notable aspects of the new amendments is the increased corporate transparency regarding executive remuneration. The Act addresses public concerns about high levels of inequality by mandating better disclosure of senior executive pay. All public and state-owned companies are now required to prepare a detailed remuneration report for the previous financial year. This report must include:
- The company’s remuneration policy and an implementation report.
- Total remuneration received by each director and prescribed officer.
- Total remuneration for the highest and lowest-paid employees.
- The average and median total remuneration of all employees.
- The remuneration gap between the top 5% highest-paid employees and the bottom 5% lowest-paid employees.
By providing such detailed disclosures, the Act aims to promote fairness and equity within companies, ensuring that remuneration practices are transparent and justifiable.
Shareholder Empowerment
The amendments also empower shareholders by requiring public and state-owned companies to present their remuneration policies for shareholder approval. This move ensures that shareholders have a say in the remuneration structures of their companies, fostering greater alignment between the interests of directors, senior management, shareholders, and workers.
Enhanced Accountability
The Companies Second Amendment Act introduces important measures to enhance accountability and address misconduct within companies. One of the key changes is the extension of the period during which proceedings can be launched to recover losses, damages, or costs for which a person may be held liable under the law. Following recommendations from the Judicial Commission of Inquiry into Allegations of State Capture, Corruption, and Fraud in the Public Sector (State Capture Commission), the Act extends the time bar for declaring a director delinquent from 24 months to 60 months. Additionally, courts now have the power to extend this period further if good cause is shown. These changes are aimed at ensuring that delinquent directors can be held accountable, even after an extended period, thereby promoting ethical conduct in business.
Preventing Unethical Conduct
The amendments also include provisions to prevent unethical, reckless, and criminal conduct in businesses. For instance, paid shares must be transferred to a stakeholder and held in terms of a stakeholder agreement until fully paid. This measure is designed to safeguard the interests of shareholders, workers, clients, customers, and the economy as a whole.
Climate Change Act
The Climate Change Act 2022, signed into law on July 18, marks a significant step towards environmental sustainability. The Act sets carbon reduction targets on a sectoral basis, guiding industries and large emitters towards net-zero emissions. The Department of Forestry, Fisheries, and the Environment must publish the greenhouse gas (GHG) emitting sectors and subsectors subject to sectoral emissions targets and allocate carbon budgets for emitters, who must then submit a GHG mitigation plan. Businesses that fail to submit a mitigation plan or provide necessary information to the minister will face penalties.
The Act also establishes the Presidential Climate Commission as a statutory body and empowers all layers of government to manage emissions targets. An adaptation resilience fund is set up, requiring the state to undertake adaptation financing and resilience efforts, which is crucial given the expected increase in severe weather events due to climate change.
Public Procurement Act
The Public Procurement Act aims to establish a single framework for sourcing, buying, and paying for goods and services by all organs of state, with a strong emphasis on transformation. It designates groups for preferential procurement, including black people, women, people with disabilities, military veterans, youth, small enterprises, and cooperatives. However, concerns remain about local capacity to meet the Act’s local content provisions, particularly in manufacturing, and the risk of accepting higher-cost bids that meet the Act’s requirements.
The Act seeks to address weaknesses in the current procurement system and combat endemic corruption in state tenders by centralizing procurement through the Finance Minister.
The recent legislative reforms in South Africa mark a significant step towards creating a more transparent, fair, and efficient business environment. By promoting ease of doing business, enhancing corporate transparency, empowering shareholders, and strengthening accountability, these reforms are set to foster growth and investment in the South African economy. Additionally, the Climate Change Act and Public Procurement Act demonstrate the government’s commitment to environmental sustainability and equitable procurement practices.
At InterGest South Africa, we specialize in guiding foreign companies through regulatory changes, facilitating entry and expansion into South Africa’s dynamic market. Our services include regulatory compliance, environmental strategy, procurement advisory, and ongoing support to ensure your business thrives amidst evolving legislative landscapes, Our team remains optimistic about the positive impact these changes will have on our business landscape. We believe that these reforms will pave the way for a more equitable and thriving economy, attracting both domestic and international investors. We pride ourselves on being here to help you navigate these changes and succeed in South Africa’s dynamic market.
Together, we can harness the potential of these reforms to drive success and growth in your business. Email us today!
SOURCES:
https://www.sanews.gov.za/south-africa/president-assents-laws-advancing-ease-doing-business
