What were the salient agreements and actions of the latest German-South African Binational Commission (BNC)?

The Ninth Session of the Germany-South Africa Binational Commission (BNC), co-chaired by  Dr. Frank-Walter Steinmeier, Foreign Minister of Germany,and Maite Nkoana-Mashabane, Minister of International Relations and Cooperation (DIRCO) of South Africa, took place in Berlin on 16 November 2016. The BNC is the principal platform to steer the intra-governmental relations between Germany and South Africa. It meets every other year with the participation of several Ministries from both governments in order to establish an agenda and programme for joint action, in most instances carried out by committees or working groups.

The salient agreements and actions from a private sector perspective (please find the full text here):

Trade and investment: South Africa remained Germany’s most important trading partner on the African continent in 2015 with total trade 15.5 billion Euro. All parties agreed to make joint efforts to boost South Africa’s exports to Germany with a particular focus on high value-added products. Market access is the most important prerequisite for mutually beneficial, free and rules-based trade. Besides the lowering of customs duties, minimising of non-tariff barriers is of increasing importance for trade growth. South Africa is the most important destination for German direct investment in Sub-Saharan Africa. The stock of German direct investment in South Africa has been increased from 4 bn Euro in 2008 to nearly 6 bn Euro in 2014. On 15 November, a new Enterprise and Supplier Development Fund has been ratified, which will help German business to meet the requirements of public procurement and local content. Both sides agreed that a high level of legal protection of investments by their respective national laws as well as consistent and fair business practices are important in order to boost foreign direct investments. 

Renewable Energy: Various aspects related to energy generation from renewable energy sources were discussed, including the German-South African Energy Partnership and an invitation to participate in the annual Berlin Energy Transition Dialogue (BETD) in March 2017, organised by the German Federal Foreign Office and the Federal Ministry for Economic Affairs and Energy. Germany committed an interest-subsidised loan of up to EUR 100 million for the integration of renewable energy to the national electricity grid.

Raw materials and beneficiation: Germany indicated its interest to strengthen its cooperation with South Africa in the field of raw materials along the entire value chain, in full alignment with South Africa’s beneficiation strategy, and suggested to leverage the German Chamber’s Competence Centres on Mining and Mineral Resources in South Africa in that regard.

Skills development and vocation training: The German Chamber, in cooperation with German companies, offers the Builders Training Centre and the Commercial Advancement Training Scheme in Africa. In addition,  South Africa and Germany agreed to reinforce their cooperation Technical and Vocational Education and Training (TVET), which means that Germany will assist South Africa in rolling out the training of electricians and plumbers to improve the capabilities of TVET colleges under the Dual System Pilot Project and improving the quality of training by expanding in-service training for college lecturers.  Please note that context that e.g. Austria has recently committed itself to a similar vocational programme in South Africa 

Cooperation in the Financial Sector: The intent to cooperate is outlined in the Memorandum of Understanding between the South-African Reserve Bank and the Deutsche Bundesbank. Joint research projects on financial sector topics will be done for the purpose of capacity building and supporting formulating of policy in both countries.

Double Taxation Agreement (DTA): Both countries declared their strong interest in concluding the negotiations on the Double Taxation Agreement and strive to solve all open questions as soon as possible. 

Technical and Financial Development Cooperation: The total volume of bilateral Technical and Financial Cooperation since cooperation began in 1992 amounts to EUR 1.1 billion. Germany undertakes to provide South Africa with a new amount of up to EUR 314.25 million for bilateral Technical and Financial Cooperation (EUR 285.75 million for Financial Cooperation programmes and EUR 28.5 million for Technical Cooperation programmes). All projects are recorded as being fully aligned with the South African National Development Plan and shall be continued in the context of the implementation of the 2030 Agenda for Sustainable Development including the Sustainable Development Goals. 

New funds were committed to the following programmes:

  • Green Economy
  • Renewable Grid Integration and Strengthening Programme EUR 100 million
  • South African Facility for Green Growth (SAFGG) EUR 75 million
  • Climate Initiative for Urban Waste Water Treatment in Cape Town EUR 80 million
  • International Housing Solutions Fund EUR 7.5 million
  • South African – German Energy Programme (SAGEN) EUR 9.5 million
  •  Technical and Vocational Education and Training (TVET) and Skills Development
  • Promotion of Vocational Education and Training EUR 8.25 million
  • Skills Development for a Green Economy EUR 9 million
  • Governance and Public Administration
  • Governance Support Programme (GSP II) EUR 5 million
  • HIV Prevention
  • Multisectoral HIV Prevention in Eastern Cape EUR 8 million
  • Support of the Activate! Leadership Programme for Youth Development EUR 7 million
  • HIV/AIDS Prevention EUR 5 million

What is the status of the Mineral and Petroleum Resources Development Act (MPRDA) Amendment Bill, 2013, and are amendments still possible?

The much debated Minerals and Petroleum Resources Development Act (MPRDA) Amendment Bill, No 15 of 2013 (Bill) has been passed by the National Assembly on 1 November and has been transmitted to the National Council of Provinces (NCOP) for concurrence.

Assuming the NCOP will approve the Bill, it will be forwarded to the President for assent and in a final step be gazetted thereafter. 

There have been a number of reasons for the Bill’s delay, including certain reservations of the President (consultative issues in relation to the involvement of the National House of Traditional Leaders), as well as constitutional issues regarding the Codes of Good practice and the Housing and Living Condition Standards for the minerals industry. Concerns regarding the implementation of other petroleum-related issues, particularly the state’s free carry and the dissolution of the petroleum agency have not been a focal point for the involved legislative bodies.

Amendments are still possible. The NCOP may yet summon stakeholders to report to it in regard to outstanding contentious issues by accepting petitions, representations or submissions as part of the meetings of its select committee on land and mineral resources. Those stakeholders may yet have an opportunity to influence the final version of the Bill. Any petitions, representations, submissions, public consultations or hearings will undoubtedly be a much more curtailed process given that stakeholders have had an extended period to prepare. Once the Bill is passed, it will serve as a  legislative framework to underpin the contractual terms which must ultimately be agreed between the investor and the Minister of Mineral Resources.

In the light of the proposed Amendment of the National Energy Regulation Act; Gas Amendment Bill; Upstream Gas Bill; and Petroleum Agency of South Africa Establishment Bill, there is a possibility that parts of our current oil and gas legislation will be detached from the MPRDA and a silent separation of the petroleum sector from the mining industry may take place. Hence, investments in the oil and gas exploration and production in South Africa will soon be regulated by more than just the Minerals and Petroleum Resources Development Act.

What are the latest developments regarding Broad-Based Black Economic Empowerment (B-BBEE)?

Sector Codes

The implementation of specific B-BBEE Sector Codes continues. The Amended Information and Communication Technology B-BBEE Sector Code came into effect on 7 November 2016. (please click here for the full text). On 28 October 2016, the DTI published the Draft Amended Construction B-BBEE Sector Code for comment. Comments must be submitted in writing within 60 days. Please click here to read the Minister’s comments. On the same day, 28 October 2016, the DTI informed members of the public of its intention to develop a sector code for the Defence Industry. Interested parties are requested to interact with the South African Defence Industry Steering Committee addressed to the Secretariat on the e-mail address: admincharter@armscor.co.za. The notice can be found here

B-BBEE Commission

The newly established B-BBEE Commission (website) has issued its first two practice notes and first interpretive guide:

  1. The first serves as an interpretative guide for the recognition of Procurement Spend in terms of Statement 400 (Enterprise and Supplier Development). In brief, it deals with the recognition of procurement spend under Code Series 400 requiring the procurement of goods and services from an empowering supplier. An empowering supplier is a B-BBEE compliant entity who is required to meet various obligations outlined in the Generic Codes. Notably, these requirements may in some cases be difficult to attain. Some relief has been granted pursuant to the DTI's notice published on 28 October 2016, which states that all entities are automatically empowering suppliers, irrespective of compliance with the requirements of the empowering supplier provisions in the Generic Codes. The notice can be found here.
  2. The second serves as a guide with regards to the issue of B-BBEE Certificates for  exempted micro enterprises (EMEs) and qualifying small enterprises (QSEs). The practice note set outt the requirements for sworn affidavits for both categories who do not require B-BBEE verification certificates. The notice can be found here.
  3. The Explanatory Note deals with the procedure for requesting a non-binding advisory opinion from the Commission. The Explanatory Note can be found here.

Finally, on 8 November 2016, the DTI published a notice proposing that all major B-BBEE ownership transactions over R100 million, calculated by either combining the annual turnover of both entities or their asset values, must be registered with the B-BBEE commission. All major B-BBEE ownership transactions concluded on or after 24 October 2014 will need to be registered within 30 days of the final publication notice. All major B-BBEE ownership transactions concluded prior to 24 October 2014 can be voluntarily registered with the B-BBEE commission. Comments on the notice must be submitted in writing within 30 days. The Notice can be found here.

What is the King IV Report of Governance?

The Institute of Directors in Southern Africa (IoDSA) formally introduced the King Code of Governance Principles and the King Report on Governance (King III). King III came into effect on 1 March 2010 – until then King II applied. The Code and Report also falls in line with the Companies Act no 71 of 2008, which became effective on 1 May 2011.

Like its 56 commonwealth peers, King III has been written in accordance to the comply or explain principle based approach of governance, but specifically the apply or explain regime. This regime is currently unique in the Netherlands and now in South Africa. Whilst this approach remains a hotly debated issue globally, the King III Committee continues to believe it should be a non-legislative code on principles and practices

The latest version, King IV, was released on 1 November 2016.  It is effective for financial years commencing from  1 April 2017.

King IV builds on King III insofar as that it has been revised to bring it up to date with international governance codes and best practice. King IV is structured as a Report that includes a Code, with additional, separate sector supplements for SME’s, NPO’s, State-Owned Entities, Municipalities and Retirement Funds. The King Code contains both principles and recommended practices aimed at achieving governance outcomes. Whilst King IV is voluntary (unless prescribed by law or a stock exchange Listings Requirement) it is envisaged that it will be applicable to all organisations irrespective of their form or manner of incorporation. 

The main differences between King III and IV are:

  1. King IV is outcomes oriented, ie it places accountability on the governing body (e.g. the board in companies) to attain the governance outcomes of an ethical culture, good performance and effective control within the organisation and legitimacy with stakeholders, as opposed to just a "tick box" mentality.
  2. King IV requires an “Apply AND Explain” approach to disclosure, as opposed to King III which was ‘Apply Or Explain’. This means that application of the principles is assumed and that an explanation is disclosed on the practices that have been implemented and how these support achieving the associated governance principle according to KPMG.
  3. King IV provides five ‘sector’ supplements
    1. Municipalities
    2. Non-Profit Organisations
    3. Retirement Funds
    4. Small and Medium Enterprises
    5. State-owned Entities

For more information, please refer to the following sources:

  • SAICA (portal with various commentaries from large audit firms)
  • Link to the King IV App launched by the Institute of Directors
  • Portal by the Institute of Directors regarding King IV, including infographics, a Q&A section, etc.