27 July 2022 by and Corporate & Commercial Alert

High Court sets aside B-BEE Commission’s findings

In Sasol Oil Limited v The B-BBEE Commission and Others (21415/2020) [2022] ZAGPPHC 431 (14 June 2022) the High Court of South Africa (Gauteng Division, Pretoria) was called upon to determine whether certain adverse findings of fronting made by the B-BEE Commission (Commission) against Sasol Oil Limited (Sasol Oil) should be reviewed and set aside under the Promotion of Administrative Justice Act 3 of 2000. 

The Commission, acting on a complaint received against Sasol Oil in 2017, made certain “final findings” in 2019 that were adverse to Sasol Oil. One of these findings was that Sasol Oil was somehow responsible for the terms of a shareholder funding agreement entered into by one of its shareholders (Golden Falls) to facilitate its acquisition of shares in Sasol Oil. However, Sasol Oil was not aware of the existence of this agreement until Golden Falls had asked Sasol Oil to facilitate a negotiation in respect of disputes arising from this agreement, which Sasol Oil had then done and was of the view that matters had been satisfactorily resolved. The Commission, ignoring the evidence in front of it while acting on irrational assumptions which were erroneous, found that Sasol Oil had engaged in fronting.

The High Court, having examined all evidence before it, set aside all of the Commission’s findings against Sasol Oil, calling these findings “irrelevant”, “irrational” and “unreasonable” and concluding that the findings were made arbitrarily or capriciously. However, there are two particular findings of the court in this judgment that merit attention and may be relevant to anyone having had dealings with the Commission in the past or needing to have dealings with the Commission in the future. 

The Commission’s “recommendations” following its final findings

The Commission made certain recommendations against Sasol Oil. These included a recommendation that Sasol Oil contribute a whopping 10% of its annual turnover to a bursary fund. Those who have had engagements with the Commission during the course of the Commission’s investigations may be familiar with this recommendation, which is sometimes raised as a proposed settlement mechanism by the Commission.

The Commission, when pressed by the court as to the source of its powers to be able to make such recommendations, was not able to answer. The court found that the Commission was not authorised to make these recommendations and, damningly, that the Commission had threatened to exercise its statutory powers for an ulterior purpose of compelling Sasol Oil to adopt and implement its unlawful recommendations.

Time barred findings

In terms of the Broad-Based Black Economic Empowerment Regulations (2016) (Regulations), the Commission must, within one year of receiving a complaint, make a finding, with or without recommendations. In this case, a complaint against Sasol Oil was lodged with the Commission in December 2016, with final findings being issued on 7 October 2019. Sasol Oil contended that the Commission’s findings were time barred as the report was rendered outside of the time limit prescribed by the Regulations.

In response, the Commission sought to rely on another of the Regulations, which permits the Commission to extend the time warranted to conclude an investigation. However, in such cases, the Commission must inform the complainant of the need to extend the time, the circumstances warranting a longer period of time, and the exact time period required as an extension.

However, the Commission itself had not complied with the provisions of this Regulation. On 12 July 2018, the Commission had sought a two-month extension to September 2018 but had not explained what circumstances warranted the extension. Even if the Commission had followed procedure correctly and sought an extension in this July 2018 correspondence, this extension was only until September 2018, whereas the final findings against Sasol Oil were made over 12 months later.

The court found that, on this basis alone (leaving aside all the other grounds upon which the Commission’s findings against Sasol Oil were set aside), the Commission’s findings were reviewable in that a mandatory and material condition prescribed by the empowering provision (the Regulations) was not complied with.

Accordingly, all of the Commission’s findings against Sasol Oil were declared invalid and set aside. As part of its order, the court interdicted the Commission from making unlawful demands of Sasol Oil and threatening to invoke its powers against Sasol Oil if Sasol Oil did not comply with the Commission’s unlawful demands.

This case, a far reaching and long overdue judgment, is the second time this year where the Court reviewed and set aside “final findings” made by the Commission (as detailed in our previous article B-BBEE Commission found to lack evidence in finding of fronting. Importantly, this case confirms that the Commission can only act in accordance with the powers conferred upon it and it should not use these powers for ulterior purposes. In addition, investigations must be conducted within the time frames prescribed by the Regulations, or an extension properly sought under the Regulations, failing which findings may be set aside. A tough judgment against the Commission, but hopefully these findings will bring about changes in terms of how these investigations are undertaken going forward.

download PDF

The information and material published on this website is provided for general purposes only and does not constitute legal advice.

We make every effort to ensure that the content is updated regularly and to offer the most current and accurate information. Please consult one of our lawyers on any specific legal problem or matter.

We accept no responsibility for any loss or damage, whether direct or consequential, which may arise from reliance on the information contained in these pages.

Please refer to the full terms and conditions on the website.

Copyright © 2022 Cliffe Dekker Hofmeyr. All rights reserved. For permission to reproduce an article or publication, please contact us cliffedekkerhofmeyr@cdhlegal.com

You may also be interested in