11 11月 2024
Insight
Global
The landscape
Class actions are relatively new in South Africa. The landscape has developed significantly in recent years, with several high-profile cases illustrating the growing use of the mechanism to address widespread human rights and environmental concerns.
These include a major silicosis class action against South African gold mining companies, as well as ongoing litigation against Anglo American for alleged lead poisoning in the Zambian town of Kabwe. The latter case was filed in South Africa because Zambia does not permit class-action cases, illustrating the need for multinational companies operating across jurisdictions to be mindful of South African law.
In South Africa, courts are taking a proactive role to develop class actions procedures in the absence of specific legislation guided by constitutional principles. The South African Competition Commission is an example of a regulatory body that is also helping to shape the landscape by establishing legal frameworks, in this case involving anti-competitive practices, enforcing compliance and providing mechanisms for redress.
South Africa’s judiciary is increasingly willing to certify class actions to enforce corporate accountability and provide redress for large-scale injustices. Companies will face heightened scrutiny as public awareness continues to grow of legal rights and the effectiveness of class actions in addressing corporate misconduct."
Jonathan Ripley-Evans
Partner
Current developments
Several important class actions are pending in South Africa. In 2023, thousands of prospective class members applied to the Johannesburg High Court for certification of a class action against coal mining companies. It is alleged the companies failed to protect workers from toxic levels of exposure to coal dust.
In 2024, there have been accusations against several major South African banks for allegedly repossessing homes and selling them at prices significantly below their market value following mortgage defaults.
In another recent case, shareholders sought redress for financial losses following revelations of accounting fraud. This case has set a precedent for shareholder activism and highlights the importance of transparent corporate governance.
Future trends
Overall, it appears that South Africa’s judiciary is increasingly willing to certify class actions to enforce corporate accountability and provide redress for large-scale injustices. It can be expected that companies will face heightened scrutiny as public awareness continues to grow of legal rights and the effectiveness of class actions in addressing corporate misconduct.
South African businesses have also become significantly more concerned about facing class actions. They are wary of the potential for both reputational damage and substantial financial settlements, which can impact investor and public confidence. Company share prices are also vulnerable, given how long it takes for cases to be resolved through the courts.
The judicial development of South Africa’s class actions framework can be expected to continue, notwithstanding legislative gaps. Mining and manufacturing are particularly likely to see more claims, given the salience of environmental and human rights issues as South Africa and the wider continent face economic development and resource extraction challenges.
The financial services sector may experience more shareholder and consumer protection class actions. Increased digital transformation also suggests a rise in class actions related to data privacy and cybersecurity breaches, with banking, telecommunications and e-commerce particularly vulnerable.
To mitigate cyber risks, African businesses are seeking to collaborate. This includes efforts such as Africa Computer Emergency Response Team (AfricaCERT) to enhance cybersecurity resilience through information sharing and cooperation. There is also a strong emphasis on employee training and growing investments in cybersecurity technologies such as cloud-based security solutions, often with government support.
Next steps for business
Businesses in South Africa are increasingly aware of the need for robust compliance and risk management strategies to mitigate class action liabilities.
Conducting regular risk assessments is important to identify potential liabilities early. Assessments should be comprehensive, covering legal compliance, environmental and social impact, as well as corporate governance. Best practices include implementing rigorous compliance programs, regularly auditing operations and maintaining transparent stakeholder communications.
Companies should establish clear corporate governance structures, including dedicated risk management committees. Ensuring that compliance programs are robust and effective involves regular employee training, staying up-to-date with regulatory changes and engaging external experts to conduct independent audits.
As a proactive measure, firms would be well advised to implement similar procedures as those in global jurisdictions where class actions are well-established. This is to ensure they stay ahead of any new legislative developments in South Africa.
Chapters
- Class Actions radar: Scanning global trends and risks
- Class Actions radar: Australia
- Class Actions radar: United Kingdom – General (England and Wales)
- Class Actions radar: United Kingdom – Competition
- Class Actions radar: France
- Class Actions radar: Germany
- Class Actions radar: Italy
- Class Actions radar: South Africa
- Class Actions radar: Spain
- Class Actions radar: Thailand
Key contacts
Legal Notice
The contents of this publication are for reference purposes only and may not be current as at the date of accessing this publication. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication.
© Herbert Smith Freehills 2024
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