Judges matter more than ever. The Judicial Service Commission’s (JSC) decision to not recommend judge David Unterhalter to fill one of the two openings on the Supreme Court of Appeal (SCA) bench leaves little doubt that the judicial appointment process is in crisis.
Despite his being regarded by peers as one of the finest jurists in the country it was Unterhalter’s fifth JSC refusal for appointment to the appellate bench, after applications to the Constitutional Court and the SCA.
This time the JSC chose to raise specious claims of soliciting bribes, which were easily batted away by Unterhalter, who explained that his computer email had been hacked and an email sent to a host of contacts. When it was discovered he promptly reported the incident to the Office of the Chief Justice and nothing further came of it.
This looks and smells like a strategic attack on the judiciary given that Unterhalter is being blocked from occupying some of the most important benches in the country. One can only speculate why.
The reality is that far too much social justice has crept into the field of corporate law in SA, through legally questionable judgments that have set precedents which the governing party’s policy apparatchiks are only too willing to exploit.
Take the Mediclinic judgment, delivered by outgoing chief justice Mogoeng Mogoeng. I first wrote about it in November 2021, but the nub of the case was that Mogoeng chose to justify blocking the deal reached between Mediclinic and seller Matlosana Medical Health Services to acquire two hospitals, using the section 27 right to healthcare in the constitution (“Mediclinic ruling reflects jaundiced view of business that hurts all”).
To say applying a bill of rights lens to the public interest provisions of the Competition Act, effectively extending it beyond those explicitly provided for, was novel at the time, is akin to praising Nic Berry for being an innovative referee at the breakdown. It’s simply wrong.
This judgment is used as the central plank underpinning recently published draft changes to the public interest guidelines relating to mergers in SA. In a nutshell, trade, industry & competition (and public interest, apparently) minister Ebrahim Patel wants public interest considerations to rank equal to competition factors when deals appear before the Competition Commission.
In February 2019, the Competition Act of 1998 was amended “to address issues related to high levels of business concentration and the uneven distribution of ownership, especially among different racial groups, in the SA economy”.
To achieve this, certain M&A rules were changed to explicitly consider factors such as ownership, control and support for small businesses, especially those owned or controlled by historically disadvantaged individuals.
The amendments to section 12A now clearly state three things:
- The competition assessment and the public interest assessment are equally important;
- Regardless of the outcome of the competition assessment a decision must be made about whether the merger is justifiable based on significant public interest reasons; and
- The effect of the merger on each specific public interest factor must be evaluated to make an overall decision about whether the merger is justifiable, based on significant public interest reasons.
Mogoeng’s judgment has helped grease the slippery slope Patel and his band of merry communists have placed business on. While these changes are still in draft form, the commission did say at the unveiling that it welcomes input. This was forthcoming in no uncertain terms from advocate Michelle le Roux, who was on a panel debating the issues of “deconcentration and transformation in merger control” at the commission’s 17th Annual Competition Law Conference two weeks ago.
Le Roux acknowledged the obligation to break the untransformed economic conglomerate in SA, but added hastily that the competition community needs to decide what it means to transform our economy. She went on to critique the commission’s approach to section 12 A (3)(e) as being “unpredictable, uncertain and inconsistent.” This makes it difficult when advising businesses looking to do deals. Who knows how proposed transactions may land with the commission now?
Le Roux said guidance from the competition tribunal and competition appeal court is necessary about the relationship, causal link and proportionality between the public interest ground that results in the need for a remedy and the merger, before the imposition of a condition. It is also important to determine whether the public interest remedy is necessary because of the merger or whether the remedies are merely being enforced upon it being presented to the tribunal or the competition appeal court.
On the role of the minister, she said there is uncertainty on what the role of the ministry should be and that there is a need to have a competition policy to make SA look attractive for investment. That last bit is lost on Patel especially. Through his dialectically tainted lens, business should genuflect and cough up for the privilege of doing business in SA.
The real world is reflected in the dismal foreign direct investment numbers, stagnant growth and the country’s GDP per capita having fallen 13% since 2013 from $7,460 — well above the $5,030 average for emerging countries — to $6,490 today, below the emerging market average of $6,670, according to data from the IMF.
And while Patel proudly trotted out justifications for public interest in the form of numbers of new employee share ownership plans and supplier development funds extracted through this process since 2019, precious little research has been conducted on deals that didn’t appear before the commission because the parties took one look at the uncertain minefield they were walking into and decided to take their capital elsewhere.
Business leaders just want their transactions to be completed in a timely manner. They consent to absurd requests that set precedents. Some are large and rely on the government for licences to operate and do not want to be perceived as anti-BEE. Some interact with the commission and are hesitant to make it an enemy.
While we’re looking at commercial transactions through a public interest lens, what about sellers’ rights to seek the best possible terms for their assets? It’s a must-have if start-ups are to grow and businesses are to prosper. The only hope we have is that black-owned business will wake up and realise that this will hamper its ability to sell too — remember Burger King? — or that a big corporate takes the commission on in court.
There is no hope at all that Patel will listen to reason. The commission will continue to railroad dealmakers and their clients, and SA’s economic growth hopes will remain padlocked in Patel’s box of public interest.
• Avery, a financial journalist and broadcaster, produces BDTV’s Business Watch. Contact him at badger@businesslive.co.za.
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