South African: Spectrum trading and sharing – A new spectrum management regime

Purpose of the Spectrum Policy

The Spectrum Policy serves to:

  • clarify the respective roles and responsibilities of the Minister and the Independent Communications Authority of South Africa (ICASA) in the context of spectrum management;
  • address gaps in the existing spectrum management regime;
  • address the current exclusive spectrum regime;
  • extend broadband access to include rural, remote, and underserved areas; and
  • address the failure to lower the cost of communications.

Spectrum trading and sharing provisions in the Spectrum Policy

In an effort to address perceived gaps in the current spectrum management regime, the Spectrum Policy now expressly permits the use of spectrum trading, spectrum sharing, dynamic spectrum access use, and spectrum ‘subletting’ and/or sharing between licensees, with the prior approval of ICASA. The Spectrum Policy requires that ICASA must set standard operating rules, terms and conditions applicable to the trading, sharing and sub-letting of spectrum. When developing this new regulatory framework for spectrum trading and sharing, ICASA will be required to consider public policy gains in the use of spectrum as well as the general promotion of economic development.

As a result of the new spectrum management regime, ICASA will be in a position to implement spectrum sharing in a manner that preserves all the rights of the licence holder, and at the same time unlock the potential of unused spectrum for sharing.

Furthering the proposals of the ECA Draft Amendment Bill

The spectrum sharing and trading provisions of the Spectrum Policy are aligned with the Draft Electronic Communications Amendment Bill, 2023 (Draft Amendment Bill), which proposes to amend certain aspects of the Electronic Communications Act 36 of 2005 (ECA). In particular, the Draft Amendment Bill, published on 23 June 2023, seeks to amend sections 30 and 31 of the ECA and insert a new section 31A, which will regulate spectrum sharing. These changes, if enacted into law, will permit the sharing of spectrum among licensees. The sharing of high demand spectrum will be subject to approval by ICASA, and the sharing of non-high demand spectrum will be possible on notification to ICASA. More information on the Draft Amendment Bill is accessible here.

The current spectrum sharing and trading regime

In respect of radio frequency spectrum, section 31(1) of the ECA provides that:

 ‘… no person may transmit any signal by radio or use radio apparatus to receive any signal by radio except under and in accordance with a radio frequency spectrum licence granted by [ICASA] to such person in terms of [the ECA].’

Spectrum sharing is currently dealt with under the Radio Frequency Spectrum Regulations, 2015, published under the ECA. In terms of these regulations, ICASA must approve all radio frequency spectrum sharing agreements entered into between licensees. However, these regulations are drafted very broadly, and have been deemed to be too vague, by industry players. Much of this criticism is due to the fact that there are no specific criteria that ICASA uses in determining whether or not spectrum sharing between licensees is permissible. As noted above, the Spectrum Policy seeks to remedy this by requiring ICASA to ‘set standard operating rules, terms and conditions applicable for the trading, sharing, and sub-letting of spectrum.’

Conclusion

While the Spectrum Policy liberalises spectrum sharing and trading in South Africa to an extent, and provides high-level parameters in that regard, there is little guidance as to how this will be regulated practically. Nevertheless, the Spectrum Policy may be instructive in future engagement between radio frequency licensees in relation to spectrum sharing, trading and pooling. It is also particularly relevant in light of the recent legal action taken by Vodacom against MTN regarding the spectrum sharing deals entered into between MTN and Liquid Intelligent Technologies, which have been approved by ICASA but criticised by Vodacom for giving MTN an unfair advantage and distorting competition in the market.

South Africa: Labour Appeal Court confirms the fairness of Coca-Cola’s retrenchments

We have recently discussed the landmark judgment handed down by the Constitutional Court on 17 April 2024, in Coca-Cola Beverages Africa (Pty) Ltd v Competition Commission & Food and Allied Workers Union. For an overview of the Constitutional Court decision, which considers the correct test for merger specificity of retrenchments, see our newsflash here.

In this article, we consider the recent judgment of the Labour Appeal Court (LAC) in National Union of Food Beverage Wine Spirits and Allied Workers v Coca Cola Beverages South Africa (Pty) Ltd, which deals with the fairness of the retrenchments that formed the subject-matter of the Constitutional Court decision.

The facts of this matter are discussed at high level in our previous newsflash. To recap, following a conditional merger, Coca-Cola Beverages South Africa (Pty) Ltd (CCBSA) embarked on a consultation process with the Food and Allied Workers Union (FAWU) and the National Union of Food Beverage Wine Spirits and Allied Workers (NUFBWSAW) as contemplated in section 189A of the Labour Relations Act, 1995 (LRA). In particular, CCBSA proposed to reduce the number of pre-seller positions, and to abolish the merchandiser role and replace it with a new role, with the same title, but different structure, at a lower level and rate of remuneration. Ultimately, some members of NUFBWSAW, who were employed as pre-sellers and merchandisers, were dismissed based on the operational requirements of CCBSA.

Aggrieved by their retrenchments and assisted by NUFBWSAW the employees approached the Commission for Conciliation, Mediation and Arbitration (CCMA) for relief, arguing that the dismissals were substantively unfair and seeking reinstatement and/or compensation. Subsequently, NUFBWSAW referred a statement of claim at the Labour Court advancing their contention. The union was unsuccessful at the Labour Court and appealed to the LAC. The issues for determination before the Labour Court and the LAC were the following:

  • whether the retrenchments constituted a breach of the merger conditions;
  • whether the retrenchments were automatically unfair in terms of section 187(1)(c) of the LRA; and
  • the substantive fairness of the dismissals.

Did the merger-specific condition impact the fairness of the retrenchment exercise?

The Labour Court, issuing its decision on 21 September 2021 and before the judgment of the Constitutional Court, considered the allegation that CCBSA was in violation of the merger conditions and that the asserted rationale for the retrenchments was a sham. The Labour Court did not itself conduct an analysis to determine any causal link between the merger and the subsequent retrenchments; it found that even if the retrenchments had been effected in breach of any conditions that attached to the merger, provided that the dismissals were effected for a fair reason related to CCBSA’s operational requirements, there was no unfair dismissal for the purposes of the LRA. In this regard, the merger-specific conditions did not preclude CCBSA from seeking to justify any post-merger retrenchment based on its operational requirements.  The issue was whether, for the purposes of the LRA, the dismissals were substantively fair.

The LAC endorsed the Labour Court’s approach. Hearing and issuing its decision after the Constitutional Court judgment, wherein it was held that there was insufficient evidence to establish that the merger was the principal reason for the retrenchment, the LAC found that the judgment was of neutral effect as it was not concerned with the fairness or otherwise of the retrenchment. Accordingly, the LAC focused on the remaining issues, i.e. whether the employees’ retrenchments were unfair, either for a reason that is automatically unfair, or for want of substantive fairness.

Were the dismissals automatically unfair?

In respect of the merchandisers, the union submitted that the employees’ dismissals were automatically unfair because the reason for dismissal was a refusal to accept a demand in respect of a matter of mutual interest between them and CCBSA. This was after the employees refused to accept the offer of appointment in the restructured merchandiser role, as an alternative to retrenchment.   

The Labour Court rejected the contention that the employees’ dismissals were automatically unfair for their refusal to accept alternative employment. NUFBWSAW contented that the retrenchment was designed to compel the employees to accept substantially reduced wages and different employment conditions. The Labour Court found that there was no demand made by CCBSA, but merely an offer of alternative employment in order to avoid retrenchments. Effectively, any subsequent retrenchments were not as a result of the employees refusing a demand, but a natural consequence of the section 189A process.

The LAC found that the appeal before it was similar to that of National Union of Metalworkers of SA & others v Aveng Trident Steel (A division of Aveng Africa (Pty) Ltd) (2021) ILJ 67 (CC), wherein the Constitutional Court found that it is not an automatically unfair dismissal for an employer to dismiss an employee who refuses to accept an offer of alternative employment made in the context of a retrenchment process, where the true reason for dismissal is the employer’s operational requirements.

The LAC further clarified that the sole enquiry under section 187(1)(c) is into the reason for dismissal and specifically, whether the reason for dismissal was a refusal by the employee to accept a demand made by the employer concerning terms and conditions of employment. In other words, would the dismissal have occurred had the employee not refused the demand, and was the refusal the main, dominant or proximate cause of the dismissal?

In the circumstances and on the analysis of the evidence, the LAC found that the claim of automatically unfair dismissal was correctly rejected as the offer of alternative employment on reduced wages and different terms was made to avoid retrenchment and CCBSA’s operational requirements were the main or dominant cause of the dismissals.

Were the dismissals substantively unfair?

In respect of the substantive fairness claim, the Labour Court found that there was a commercial rationale for the retrenchments. It was not for the Labour Court to determine the correctness of the solution adopted by CCBSA, but to assess whether such solution was fair, i.e. whether it was commercially rational and a reasonable option in all the circumstances. CCBSA had a fair reason to dismiss based on its operational requirements, owing to the economic headwinds it faced on the imposition of the ‘sugar tax’.

While concurring with the Labour Court in respect of this claim, the LAC emphasised that although employers have the prerogative to restructure their operations to maximise profits and operational efficiency, the courts do not have to accept the employer’s proffered rationale at face value, nor do the courts defer to employers.

The Labour Court further held that considering that all the merchandiser posts no longer formed part of the new organisational structure, the question of selection criteria did not arise and selecting the incumbents for dismissal after not being placed in the new structure was fair. This finding was not challenged.

Regarding the reduced number of pre-seller posts, the Labour Court accepted that fair and objective selection criteria, being ‘last-in-first-out’ (LIFO), skills, qualifications and experience, or a combination of these, were fairly applied except in the case of one employee, Mbatha.

The Labour Court’s finding in relation to Mbatha was also not challenged. The sole issue before the LAC was the general application of the selection criteria. In this regard, the LAC observed that only one of the 14 pre-sellers (Mbatha) gave evidence of their exclusion from alternative employment, and there was no evidence before the Labour Court that this single employee’s circumstances were the same or similar to any of the other pre-sellers selected for retrenchment. The LAC held that an employee seeking to claim unfair retrenchment in circumstances where alternative employment opportunities within the organisation are drawn to the attention of employees already selected for retrenchment, must at least plead the facts of the exclusion and the grounds on which the employee asserts that the exclusion was unfair. Such evidence will not be extrapolated from the circumstances of the employee who pleads their case.

In light of the above, the Labour Appeal Court dismissed the appeal.

Key takeaways

The key takeaways from this case are as follows:

  • Despite the existence of any merger conditions relating to retrenchments, in an unfair dismissal (retrenchment) claim, the Labour Court will consider the matter on the basis of fairness, in light of section 189 or 189A of the LRA. Provided that the dismissal is effected for a fair reason related to the employer’s operational requirements, a breach of any merger conditions will not mean that the dismissal is unfair for the purposes of the LRA.
  • The application of section 187(1)(c) of the LRA focuses on the enquiry whether the reason for dismissal was a refusal by the employee to accept a demand made by the employer concerning a matter of mutual interest, and whether the refusal was the main, dominant or proximate cause of the dismissal. It is not an automatically unfair dismissal for an employer to dismiss an employee who refuses to accept an offer of alternative employment made in the context of a retrenchment process, where the reason for dismissal is the employer’s operational requirements.
  • Employees that allege that their retrenchments are substantively unfair in circumstances where they have been excluded from alternative employment opportunities within the organisation, ought to plead the facts of their individual cases in order to prove unfairness.

South Africa: New requirements for outsourcing by insurers published in Joint Standard 1 of 2024

The Joint Standard sets out the PA and FSCA’s requirements regarding the outsourcing of material functions by licensed insurers and replaces Prudential Standard GOI 5. The Joint Standard provides a more comprehensive regulatory framework governing outsourcing by insurers from both a prudential and market conduct perspective. The Joint Standard intends to ensure that both the PA and FSCA apply requirements uniformly by assessing compliance in relation to their respective prudential and market conduct supervisory functions.

The Joint Standard applies to all insurers (including micro-insurers and reinsurers) licensed under the Insurance Act, 2017, but excludes Lloyd’s and branches of foreign reinsurers.

The Joint Standard introduces more enhanced due diligence and performance management processes and policies which insurers are required to implement. Insurers will also be required to consider their outsourcing arrangements in terms of credit and conduct risks.

Some of the new requirements that will be introduced by the Joint Standard are:

  • An insurer must, before entering into an outsourcing arrangement, undertake appropriate due diligence for every activity or function that it intends to outsource in order to identify and manage all risks introduced by the outsourcing arrangement. The scope of the due diligence must include assessing the costs, benefits and potential risk to its insurance business. Outsourcing arrangements should only be entered into where there is evidence that the benefits outweigh the costs and potential risks.
  • An insurer must, before entering into an outsourcing arrangement, consider where the service provider has multiple outsourcing arrangements with other insurers whether these multiple outsourcing arrangements are likely to increase the risks as set out in the Joint Standard, for the insurer.
  • An insurer may not enter into or maintain an outsourcing arrangement where the key persons of that service provider do not meet the fit and proper requirements relating to competence and integrity, as provided for in Prudential Standard GOI 4 which deals with the fitness and propriety of key persons of insurers.

Notification of material outsourcing is required to be made both to the PA and the FSCA at least 30 days prior to entering into an outsourcing arrangement. The notification must include certain information and be accompanied by a confirmation that the outsourcing arrangement is compliant with the insurer’s outsourcing policy and within the risk appetite set by the board of directors of the insurer.

When an outsourcing agreement is terminated, within  seven days of the date of termination, the insurer will also be required to notify the PA and the FSCA. The notice of termination will be required to provide specific information to the PA and the FSCA.

Where there are outsourcing arrangements entered into before 1 December 2024. These arrangements must comply with the Joint Standard within 24 months of 1 December 2024 (you have until 30 November 2026 to comply) or you must comply with the Joint Standard upon the renewal or renegotiation of the outsourcing arrangement, whichever comes first.

Insurers are required to comply with the Joint Standard within six months from 1 December 2024 but in that period must continue to comply with Prudential Standard GOI 5 as if it had not been repealed.

Insurers will also need to ensure that their outsourcing policies are aligned to the Joint Standard and must ensure that the outsourcing policy is approved by their board.

The Joint Standard and supporting documents are accessible here.