COVID-19: Legal and Regulatory Impact Series, South Africa

  • As of 13th May, South Africa confirmed 11,350 cases of Coronavirus COVID-19 and reported 206 deaths. After over a month of lockdown the country has successfully flattened the COVID-19 infection curve and is now entering a risk-based phased opening of the economy. The phased return to work is likely to take some time and the state of disaster remains in place and in force until 15 June 2020. The emergency measures taken by the South African Government have been universally praised yet have inevitably caused unprecedented business disruption.

    Employment and Labour

    COVID-19 has had a material impact on employers in South Africa who will now be under immense pressure to develop a “COVID-ready” workplace. The Disaster Management Act and the COVID-19 Direction on Health and Safety in the Workplace issued by the Department of Employment and Labour have set out specific measures that employers are required to take to protect their employees during this period.

    Prior to the pandemic, health and safety regulations required employers to pro-actively provide and maintain a working environment that is safe and without risk to the health of employees, under pain of significant legal liability. Obligations include that employers must have soap and running water, and sufficient ventilation systems in offices. After lockdown, employers must “revert” to compliance with the measures that were in place before the lockdown, as well as all additional measures that have and will continue to be put in place to ensure the pandemic is contained. Companies should also be aware of and adhere to any sector-specific guidelines which have been introduced. There is likely to be increased scrutiny by regulators over the coming months and failure to adhere to the standards set out could lead to punitive action.

    In South Africa, employers will be covered under Compensation for Occupational Injuries and Diseases Act (COIDA) when it comes to being held accountable for transmission of COVID-19 in the workplace. However, they will still need to ensure they have taken reasonable practical measures to prove there has been no negligence on the part of the company. They should also be aware that COIDA only covers employees; if a third party is exposed to COVID-19 and the organisation hasn’t taken reasonable and practical measures to prevent this, then they would have potential recourse to the normal delictual claim.

    Currently, there is no employer obligation to report cases of COVID-19 – this reporting responsibility still remains the duty of medical practitioners.

    Commercial Contracts

    South Africa’s lockdown and accompanying regulations will have meant many businesses have been unable to perform contractual obligations. They will now need to look closely at whether they are protected under any terms of the contract such as force majeure or material adverse change.

    Force majeure is contractually observed in South Africa. A force majeure clause will often delay the obligation of a party to perform for a certain period. And if that period endures for a certain time it can result in termination of contract. Legal departments will need to pay particular attention to the rules around triggering force majeure in the contract. There are often very strict notice periods, meaning they would need to notify the contracting party of the force majeure within a certain timeframe.

    Where a contract does not specifically provide for force majeure events, the principle of “supervening impossibility of performance” would apply. In terms of this principle, the event(s) must have rendered performance actually impossible for any person to perform and not merely impossible for the party to the contract him/herself to perform. A good example of this would be changes to legislation that render performance illegal. The effect of supervening impossibility is that it discharges the contract in its entirety and releases all parties from their respective obligations.

    Although supervening impossibility provides a defence in the absence of a force majeure provision, it is commercially preferable to specifically provide a force majeure clause in a contract.  Whilst recognised in South African courts, it is a stricter test than force majeure and courts in the country have a very high threshold for determining if something is “impossible”.

    Corporate Law

    The Companies and Intellectual Property Commission (CIPC) announced a phase-in approach of resumption on normal business operations as from 4th May 2020. Companies should visit the website to find out which services are now available online; prior to this latest announcement CIPC was offering very limited services.

    The Companies Tribunal closed its offices on 26th March, the offices will remain closed until the end of the lock down period. Companies can apply to the tribunal for extension; however, the tribunal is reportedly over-run with online applications  which may result in delays and continued disruption. New applications may still be submitted online or through emails.

    And Finally...
    The lockdown has continued to hit the country's economy and sent it into a sharp recession. The government has announced a $42 billion counter-cyclical stimulus package. Finance minister Tito Mboweni determines to use the crisis to restructure the economy. In March, Moody's downgraded the Government of South Africa's long-term foreign-currency and local-currency issuer ratings to Ba1. The outlook remains negative.

    As part of its commitment to support businesses operating across Africa – in April, Afriwise hosted a series of country-focused COVID-19 legal and regulatory webinars. To hear more about our guidance for businesses in South Africa during this period, including for issues related to insurance, tax and insolvency, please listen to the full webinar here.

    These legal and regulatory insights have been provided by Afriwise's top South African legal partners and experts, including: Webber Wentzel, Bowmans and  Africa Risk Consulting.

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