SOUTH AFRICA Law and Practice Contributed by: Professor Michael Katz, Matthew Morrison, Madison Liebmann and Sinovuyo Damane, ENS
periods, and a certificate of compliance is now a pre - requisite for conducting business with the State. B-BBEE Broad-Based Black Economic Empowerment (B-BBEE) is a government policy aimed at increasing participation by previously disadvantaged South Afri - cans in economic activities. The B-BBEE Act No 53 of 2003, as amended, implements measures includ - ing increasing equity ownership by black people, par - ticipation in management, skills development, enter - prise and supplier development, and corporate social investment. JSE-listed companies and government entities must report annually on B-BBEE compliance to the B-BBEE Commission. Sustainability Reporting/ESG Guide The second Code for Responsible Investing in South Africa (CRISA 2), published by the CRISA Committee, builds on the original CRISA (2011) and sets out five voluntary principles for stewardship and investment. CRISA 2 has been endorsed by various institutions, including the FSCA. 7.2 ESG Developments The corporate reporting landscape is undergoing significant changes. The JSE launched its Sustain - ability Disclosure Guidance and Climate Disclosure Guidance in 2022. A 2025 review confirmed alignment with the IFRS S1 and IFRS S2 standards published by the ISSB in June 2023. CIPC has introduced ESG reporting on IFRS S1 and IFRS S2 for public and state-owned companies, which is currently volun - tary. In January 2025, CIPC published Notice 6 of 2025 regarding public consultations on implementing mandatory sustainability reporting obligations. The Department of Trade, Industry and Competition has requested CIPC to join a Steering Committee oversee - ing a Regulatory Impact Assessment on adopting the ISSB Sustainability Disclosure Standards. In October 2024, the Centre for Environmental Rights and the Institute of Directors in South Africa released a legal opinion detailing that directors risk breaching their fiduciary duties if they fail to manage and disclose material climate-related financial risks. A director’s failure to consider foreseeable and material climate risks could constitute a failure to act in good faith.
Failure to disclose material climate change impacts in financial statements could render them “incom - plete” or “false and misleading” under Section 29 (2) of the Companies Act. These developments reflect increased emphasis on environmental and sustain - ability components.
8. Artificial Intelligence 8.1 Board Oversight of AI
In South Africa, there are currently no specific legal or regulatory requirements that expressly mandate Board oversight of artificial intelligence, nor any pre - scribed rules on Board composition or AI-specific committees. However, Boards are indirectly required to oversee AI through existing laws and governance standards. 8.2 AI Use-Related Risks King V provides a governance framework address - ing AI use-related risks. Principle 10 states that the governing body should govern data, information and technology to sustain and optimise strategy and objectives. The governing body must oversee that the organisation’s use of emerging and disruptive technologies, particularly AI, adheres to values of ethics, human centricity, accountability, transparen - cy, explainability, security, privacy, fairness and trust - worthiness, with clear accountability for decisions, outputs and outcomes. AI-related risks fall within the scope of the organisation’s risk governance com - mittee (see 3.1 Board Structure ), which will need to expand its risk assessment accordingly. 8.3 Liability Exposures Arising From AI Use Unfair Practices AI systems that produce discriminatory or biased out - puts may expose a company to liability under relevant legislation. Where the Board has breached its fiduciary duties regarding AI use, it may be held liable under the Companies Act (see 3.6 Legal Duties of Directors/ Officers ). IP/Data Breaches The use of AI can expose companies to liability where copyrighted material is used without permission, or where AI generates outputs reproducing protected
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