Brief Summary

Administrative Law — Review of administrative action — Sasol Oil Limited sought to review the decision of the B-BBEE Commission regarding alleged non-compliance with the Broad-Based Black Economic Empowerment Act 53 of 2003 — The Commission's findings were challenged on grounds of procedural unfairness and irrationality — Court held that the Commission's decision was reviewable due to reliance on incorrect facts and failure to engage with Sasol Oil's submissions, rendering the findings invalid and unlawful.

Comprehensive Summary

Summary of Judgment

1. Introduction

The matter concerned an application in the High Court of South Africa (Gauteng Division, Pretoria) for the review and setting aside of adverse findings and related directives issued by the B-BBEE Commission against Sasol Oil Limited. The review was brought primarily under the Promotion of Administrative Justice Act 3 of 2000 (PAJA), and alternatively under the principle of legality, with reference to the Broad-Based Black Economic Empowerment Act 53 of 2003 and the regulations made under it.

The applicant was Sasol Oil Limited (a subsidiary within the Sasol group). The first respondent was the B-BBEE Commission. Additional respondents included entities and individuals connected to the empowerment transaction and later settlement (including Tshwarisano LFB Investment (Pty) Ltd, Awevest Investment Limited, African Women Enterprise Investments (Pty) Ltd, Golden Falls 467 (Pty) Ltd, Astra Group Holdings (Pty) Ltd, Firefly Capital (Pty) Ltd, Jan Willem David Bicker Caarten, Peter Charles Nash, and Empowerdex (Pty) Ltd).

The procedural history reflected that the Commission investigated a complaint associated with Sasol Oil’s empowerment transaction and issued findings in correspondence during October 2018, followed by a report dated 1 October 2019 and a final findings letter dated 7 October 2019. Sasol Oil instituted review proceedings under case number 21415/2020, seeking to have the Commission’s findings, ultimatums, and threats set aside. The Commission raised a preliminary objection that Sasol Oil had purportedly reviewed the “wrong decision” (the letter rather than the report).

The dispute concerned the lawfulness, rationality, and procedural fairness of the Commission’s conclusions that Sasol Oil had engaged in or benefitted from conduct characterised as fronting and non-compliance under the B-BBEE framework, and the lawfulness of the Commission’s accompanying demands and threatened enforcement steps.

2. Material Facts

Sasol Oil was involved in a black economic empowerment transaction in 2006, in terms of which it sold 25% of its shares to Tshwarisano LFB Investment (Pty) Ltd, described as a black-controlled company whose shareholders were mostly black people or black-controlled entities. Within Tshwarisano’s shareholding structure, Golden Falls held 5.58% of Tshwarisano’s shares. Golden Falls was described as a special purpose vehicle created to hold that interest, and it was wholly owned by Awevest Investment Limited, associated with African women represented by Ms Queen Elizabeth Sangion.

Golden Falls did not have the funds to acquire its stake and, in May 2007, a group of funders subscribed for redeemable preference shares in Golden Falls through a Preference Share Subscription Agreement to finance the acquisition. The Commission’s later conclusions were directed at the alleged effect of this preference share funding arrangement on the authenticity of black ownership and control within the empowerment structure.

In December 2015, Ms Sangion complained to Sasol Limited that the preference share arrangement unfairly favoured the funders and undermined the empowerment purpose of the transaction. Sasol Limited facilitated negotiations between affected parties, resulting in a Settlement Agreement concluded on 5 September 2016 between Golden Falls, Awevest, African Women Enterprise Investments, and the funders (including Astra Group Holdings, Firefly Capital, and named individuals). The record included documentation indicating that Golden Falls, through a board resolution signed by directors including Ms Sangion, considered it in the company’s interest to enter into and implement the settlement.

In October 2017, Sasol Oil received notice from the Commission that it was investigating a complaint lodged by Ms Sangion under the Act. The Commission treated the complaint as involving an allegation that Sasol Oil had knowingly engaged in fronting, on the basis that Sasol Oil allegedly claimed a B-BBEE rating premised on black ownership (through Golden Falls) while white funders were said to be the true beneficiaries.

A material disputed issue (as addressed by the court) concerned whether Sasol Oil had knowledge of the preference share agreement “from the very onset.” The Commission’s stance depended substantially on an assumption that a Mr Peter Wingrove, who was allegedly involved in negotiations, was an “advisor to Sasol Oil.” Sasol Oil’s version (which it reiterated in its affidavits) was that it only became aware of the preference share agreement when Ms Sangion approached it in December 2015, and that Wingrove was not Sasol Oil’s advisor at the relevant time but rather associated with Tshwarisano. The court treated the Commission’s position as resting on incorrect facts and lacking admissible evidentiary support.

A further material issue concerned the impact (or lack thereof) of Golden Falls’ position on Sasol Oil’s B-BBEE rating. Sasol Oil’s position, accepted as uncontested in substance by the court’s analysis, was that its B-BBEE status depended on Tshwarisano’s 25% shareholding as a black-controlled entity, and that Tshwarisano’s black shareholding exceeded 51% even excluding Golden Falls. Sasol Oil pointed to two Empowerdex certificates (January 2018 and November 2018) which reflected that excluding Golden Falls made no material difference to Sasol Oil’s contributor level and overall score.

The Commission’s final findings were conveyed by a letter of 7 October 2019, annexing a summarised version of a report dated 1 October 2019. The letter recorded adverse conclusions (including that Sasol Oil benefitted from a “fictitious” ownership scheme), contained an ultimatum, and included threats of invoking statutory powers. It also contained “recommendations,” including proposals that Sasol Oil’s directors and senior executives undergo training, that Sasol Oil publicly apologise, and that Sasol Oil contribute 10% of its annual turnover to a bursary fund.

Finally, the timing of the Commission’s findings was material. The complaint was lodged on 6 December 2016, while the final findings were issued only on 7 October 2019. The court treated compliance with the one-year period in the regulations as a mandatory feature of the Commission’s process and concluded that the Commission’s findings were out of time.

3. Legal Issues

The court was required to determine, first, whether the Commission’s preliminary objection should succeed, namely whether Sasol Oil had impermissibly sought to review the wrong decision by targeting the final findings letter rather than the underlying investigation report.

The court then had to determine whether the impugned decisions constituted administrative action and, if so, whether they were susceptible to review under PAJA on grounds including procedural unfairness, irrationality, unreasonableness, reliance on irrelevant considerations or failure to consider relevant considerations, and non-compliance with mandatory conditions prescribed by the empowering provisions.

A further set of questions involved the legality of the Commission’s conduct by reference to the B-BBEE Act and its regulations, including whether the Commission complied with regulatory requirements concerning fairness in investigations and whether it acted within its powers when issuing certain “recommendations” and threats.

The issues included both questions of law (the interpretation and application of PAJA and the empowering regulatory framework, the characterisation of the Commission’s actions as administrative action, and whether powers existed for the demands made) and application of law to fact (whether the Commission’s findings were rationally connected to the evidence and whether Sasol Oil was afforded a proper opportunity to respond). The assessment of procedural fairness and rationality required evaluative judgment based on the documentary record and correspondence forming part of the Rule 53 record.

4. Court’s Reasoning

On the preliminary objection, the court analysed the relationship between the final findings letter (7 October 2019) and the report (1 October 2019). It concluded that the two could not realistically be separated: the letter was the vehicle through which the Commission communicated its final decisions, and the report formed part of the same decisional outcome. The court considered it unjustified for the Commission to complain about Sasol Oil’s formulation of the review when the Commission itself communicated its decisions in a “convoluted manner.” On this basis the point in limine was rejected, and the court treated the impugned decisions as those contained in the report as communicated through the letter.

In addressing the merits, the court proceeded from the premise that the Commission’s issuance of final findings constituted administrative action reviewable under PAJA, while noting that review could also be supported by the empowering provisions of the Act and regulations that bound the Commission to impartiality and fair administrative justice processes. The court referred to the statutory and regulatory framework emphasising impartiality, constitutional values, and procedural safeguards, including that a respondent should have an opportunity to respond to adverse findings and that investigations must conform to rules of fair administration of justice processes.

A central feature of the court’s reasoning was that material aspects of the Commission’s conclusions were based on incorrect facts and were not supported by admissible evidence. In particular, the Commission’s assumption that Sasol Oil knew of the preference share agreement from inception was tied to the asserted status of Wingrove as Sasol Oil’s advisor. The court accepted that Sasol Oil had placed evidence before it indicating that Wingrove was a representative/advisor connected to Tshwarisano rather than Sasol Oil at the relevant time, and it found the Commission’s contrary factual premise to be incorrect. This factual misdirection rendered the Commission’s conclusions reviewable and irrational.

The court also reasoned that the Commission acted irrationally in its treatment of Sasol Oil’s response to Ms Sangion’s 2015 complaint. The record showed Sasol Oil had facilitated negotiations resulting in a settlement agreement concluded in September 2016 and signed on behalf of the relevant entities, including by Ms Sangion, accompanied by a board resolution. The court considered that Sasol Oil was entitled to regard the matter as resolved unless and until informed otherwise, and it found the Commission’s criticism of Sasol Oil for failing to “follow through” to be unjustified on the facts the Commission had before it. The Commission’s findings were described as reflecting irrelevant considerations or a failure to consider relevant considerations, as well as arbitrary, capricious, irrational, and unreasonable decision-making within the review grounds under PAJA.

On the Commission’s conclusions about Sasol Oil’s B-BBEE rating and alleged misrepresentation, the court analysed the Commission’s stated reasoning against the structure of measurement in the Codes of Good Practice on Broad Based Economic Empowerment of 2013, particularly Code 100 dealing with ownership scoring and the flow-through principles. The court accepted Sasol Oil’s uncontested evidence that Tshwarisano’s black shareholding exceeded 51% even excluding Golden Falls, and concluded that Sasol Oil’s B-BBEE rating would not be materially affected in the manner suggested by the Commission. The court considered the comparison of Empowerdex certificates (before and after excluding Golden Falls) to demonstrate that the Commission misdirected itself in concluding that Sasol Oil had misrepresented its B-BBEE status.

In relation to fronting, the court referred to the statutory definition and observed that the Commission’s approach sought to ascribe fronting intent to Sasol Oil through an agreement to which Sasol Oil (and Tshwarisano) were not parties, and which was concluded by independent parties as part of Golden Falls/Awevest’s fundraising efforts. The court reasoned that attributing fronting intent to Sasol Oil on this basis was irrational, particularly given the earlier finding that the Commission’s assumption of Sasol Oil’s awareness of the preference share arrangement from inception was incorrect.

On procedural fairness and the audi alteram partem principle, the court examined the Commission’s correspondence, especially a letter dated 18 October 2018. Although the Commission contended that Sasol Oil was afforded an opportunity to respond, the court read the letter as stating unequivocally that the Commission had already “finalised its investigation” and was notifying Sasol Oil of findings, with remedial steps contemplated. The court considered this to render the later “invitation” to respond ambiguous and substantively deficient. The court further found that Sasol Oil’s responses appeared not to have been considered at all because the final findings in October 2019 reproduced the October 2018 findings verbatim. This supported the conclusion that the Commission’s invitation to respond was effectively “lip service,” resulting in procedural unfairness and reviewability under PAJA and non-compliance with the fairness requirements in the regulations.

The court also scrutinised the Commission’s “recommendations” and threats. It noted that the Commission proposed measures such as compulsory training, a public apology, and a contribution of 10% of annual turnover to a bursary fund. When the Commission’s counsel was asked to identify the source of power for such measures, the court recorded that counsel struggled to do so. The court concluded that these recommendations were ultra vires (not authorised by the empowering provisions) and that the Commission threatened to exercise statutory powers for an ulterior purpose, namely to compel compliance with unlawful demands. This constituted reviewable administrative action under PAJA.

Finally, the court addressed the time-bar. It applied regulation 15(4)(g), which required the Commission to make a finding within one year of receipt of the complaint. The complaint was lodged in December 2016, while the final findings were issued only in October 2019. The Commission relied on regulation 15(15) to justify an extension, but the court treated it as common cause that the findings were made outside the prescribed period and thus fell foul of regulation 15(4)(g). The court held that a mandatory and material condition prescribed by the empowering provision was not complied with, rendering the findings reviewable under PAJA, and that the findings contravened the regulation.

5. Outcome and Relief

The court reviewed and set aside the Commission’s decision communicated in the letter dated 7 October 2019, including the findings, ultimatums, and threats identified in the order. The court declared the impugned decision invalid and set it aside.

In addition, the court granted an interdict restraining the Commission from making unlawful demands of Sasol Oil and from threatening to invoke its powers against Sasol Oil to compel compliance with such unlawful demands.

The Commission was ordered to pay Sasol Oil’s costs, including the costs of three counsel.

Cases Cited

Greys Marine Hout Bay (Pty) Ltd and Others v Minister of Public Works and Others [2005] 3 All SA 33 (SCA).

Legislation Cited

Promotion of Administrative Justice Act 3 of 2000.

Broad-Based Black Economic Empowerment Act 53 of 2003.

Constitution of the Republic of South Africa, 1996 (section 195, as referenced).

Codes of Good Practice on Broad Based Economic Empowerment of 2013 (including Code 100, as referenced).

Rules of Court Cited

Uniform Rule 53 (as referenced in relation to the record of decision).

Held

The court held that the Commission’s final findings, ultimatums, and threats communicated in October 2019 constituted administrative action and were reviewable under PAJA. The Commission’s preliminary objection that Sasol Oil had reviewed the “wrong decision” was rejected because the final findings letter and the investigation report were treated as inseparable components of the same decision-making outcome.

The court held that the Commission’s findings were materially flawed because they rested on incorrect factual assumptions, were irrational and unreasonable on the record, and were reached through a procedurally unfair process that did not meaningfully consider Sasol Oil’s responses. The court also held that certain “recommendations” and associated threats were not authorised by the empowering provisions and amounted to unlawful demands. The court further held that the Commission’s findings were issued outside the regulatory one-year period and thus contravened mandatory regulatory requirements.

LEGAL PRINCIPLES

Administrative action that materially and adversely affects rights or legitimate expectations must comply with procedural fairness requirements under PAJA, which include a genuine opportunity to be heard and proper consideration of the affected party’s response. An invitation to respond is not procedurally adequate where the decision-maker has effectively finalised its conclusions in advance and later reproduces its findings without engaging with the representations made.

A decision is reviewable under PAJA where it is based on material factual errors, where irrelevant considerations are taken into account or relevant considerations are ignored, and where the outcome is arbitrary, capricious, irrational, or unreasonable in relation to the record before the administrator.

A public authority must act within the bounds of its empowering provisions. “Recommendations” or demands that lack statutory authorisation, particularly when coupled with threats of enforcement to compel compliance, are reviewable as unauthorised action and may constitute the use of statutory powers for an ulterior purpose.

Where an empowering regulatory framework prescribes mandatory time periods and conditions for the exercise of decision-making power, non-compliance with those requirements renders the resulting findings susceptible to review on the basis that a mandatory and material condition was not met and that the action contravened the governing regulation.

Sasol Oil Limited v B-BEE Commission and Others (21415/2020) [2022] ZAGPPHC 431 (14 June 2022)