In both cases, the court upheld ministerial discretion on transformation. This means that companies that once had a big BEE component but then lost it as empowerment partners sold out could find themselves lacking the credentials to get or keep licences.
In the first case, Foodcorp's Marine Products took the department to court to challenge its policy on the transfer of commercial fishing rights, claiming the policy was unconstitutional, unlawful and invalid.
Foodcorp and its subsidiaries were granted long-term commercial fishing rights in 2005 when black-owned investment company Pamodzi Investment Holdings had a majority shareholding (58.33%).
A majority black employees' share trust held a further 17.3%.
However, in 2010 the group entered into a transaction that diluted Foodcorp's black holding to 21.59%.
The original condition when the fishing rights were granted was that such rights could not be transferred without ministerial approval.
The company did notify the department of the transaction at the time, but no decision was taken.
Fearing non-approval of the transfer of majority ownership, the group decided to launch a pre-emptive strike, objecting to what it called a vague, irrational and unreasonable policy document to be applied in the minister's decision-making process.
The Western Cape High Court found that the policy document was constitutional, and that to avoid loopholes for transferring fishing rights under the guise of simple share sales the minister's discretion should apply in achieving equity and addressing historical imbalances in the fishing industry.
In the second case, Oceana Group and Blue Continent Products also challenged the department's policy documents regarding the allocation and transfer of long-term fishing rights, but went a step further in arguing that the policy did not account adequately for broad-based BEE in its definition of what constituted empowerment. Oceana applied for approval of a transfer of rights in 2006, but is still waiting for a decision from the department.
Oceana and Blue Continent Products claimed the department's failure to act was due to a policy that was not yet finalised and was now damaging the company's ability to do business.
It argued that the policy was unlawful and should be set aside.
But the Supreme Court of Appeal upheld the Western Cape High Court decision.
The appeal court found that the minister's strategy for making decisions on empowerment sufficed, and that the applicants' levels of empowerment could be measurable when the minister came to decide on whether real benefits would be conferred to historically disadvantaged groups.
Source: Business Times
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