SAFLII Note: Certain personal/private details of parties or witnesses have been redacted from this document
in compliance with the law and SAFLII Policy
IN THE HIGH COURT OF SOUTH AFRICA
(WESTERN CAPE DIVISION, CAPE TOWN)
CASE NO:19613/2022
In the matter between:
HAMMARSKJOLD (PTY) LTD First Applicant
INDY PENDANT FILMS (PTY) LTD Second Applicant
and
DEPARTMENT OF TRADE, First Respondent
INDUSTRY AND COMPETITION
ACTING-DIRECTOR GENERAL OF THE Second Respondent
DEPARTMENT OF TRADE
INDUSTRY AND COMPETITION
MINISTER OF TRADE , Third Respondent
INDUSTRY AND COMPETITION
BROADBASED BLACK ECONOMIC Fourth Respondent
EMPOWERMENT COMMISSION
Delivered electronically this 17th day of July 2025 by email to the parties
JUDGMENT
___________________________________________________________________
NDITA, J
Introduction
[1] The Applicants applied for a foreign film incentive in terms of the First
Respondent’s Foreign Film and Television Production and Post -Production Incentive
Guidelines. The application was rejected by the First Respondent.
[2] The South African Film and Production Incentive Programme is aimed at
strengthening and promoting the country’s fi lm and television industry as well as
contributing towards the creation of employment opportunities in South Africa.
Foreign owned Film and Production and Post-Production qualify for incentives as set
out in the Programme Guidelines. The Applicants made an application in 2022 to the
film unit of the First Respondent for a foreign film incentive for the film
“Hammarskjold”. Hammarskjold was the Secretary-General of the United Nations
Organisation and used his position to resist powerful European powers that were
involved in the extraction of Africa’s rich mineral resources, especially in Congo. The
film relates to hardships that Africans faces as a result of colonialism. The
application was refused by the First Respondent.
[3] In this application, the Applicants seek an order declaring unconstitutional and
invalid the First Respondent’ decision to refuse the aforesaid application for a foreign
film incentive on the basis that the refusal was premised on a material error of law
concerning the proper interpretat ion of the requirements of the incentive guidelines
and the statutory scheme created by the Broadbased Black Empowerment Act 53 of
2003. The Applicants also seek an order substituting the decision of the First
Respondent with a decision granting the applic ation. More specifically, the
Applicants seek a declaratory order to the effect that:
3.1 The First Respondent’s principal reason for the refusal was the
incorrect legal interpretation of the statutory scheme and incentive guidelines
and its apparent belie f that it is bound to follow and adopt the Commission’s
interpretation in this regard.
3.2 This Court in deciding that legal issue is therefore in as good a position
to make the decision of the First Respondent as the outcome is a foregone
conclusion once the law is correctly applied.
[4] The Applicants also seek an order declaring unconstitutional and invalid a
related decision of the First Respondent not to waive a requirement for the incentive
that principal photography must not commence until an approval letter has been
received from the First Respondent. They ask for the decision to be reviewed and
set aside and replaced with a decision retrospectively waiving the requirement.
The parties
[5] The First Applicant is Hammarskjold (Pty) Ltd (“HPL”) , a private company
registered in accordance with the laws of the Republic of South Africa, with its
registered address at 8[…] R[…] Road, Woodstock, Cape Town, Western Cape.
[6] The Second Applicant is Indy Pendant Films (Pty) Ltd (“Indy”), a private
company, registered in accordance with the laws of the Republic of South Africa,
with its registered address at 8 […] R[…] Road, Woodstock, Cape Town, Western
Cape.
[7] The Applicants bring these proceedings in their own interest and in the public
interest, in terms of section 35 (a) and (d) of the Constitution.
[8] The First Respondent is the Department of Trade and Industry and
Competition (“the Department”) with its address at 8 […] S[…] G[…] M[…], Cape
Town City Centre, Cape Town.
[9] The Second Respon dent, the Acting -Director General of the Department of
Trade is the Head of the aforesaid Department and is responsible and accountable
for the official conduct of the staff of her department in the course and scope of their
duties, and for the decisions which she has authorised them to make on behalf of the
Department. Her registered address is […] W[…] Building, 8[…], S[…] G[…] M[…],
Cape Town.
[10] The Third Respondent is the Minister of Trade, Industry and Competition and
his physical address is the same as that of the Second Respondent. The Minister is
joined insofar as he may have an interest in the issues raised in these proceedings.
No relief is sought against him, save for costs in the event of opposition.
[11] The Fourth Respondent is t he Broad -Based Economic Empowerment
Commission (“BEE Commission”), an entity within the administration of the
Department, established in terms of section 13B of the Broadbased Black
Empowerment Act 53 of 2003 (“BEE Act”), with its address at the DTI campus . Its
registered address is 7 […] M[…] Street, Sunnyside, Pretoria. No relief is sought
against the Commission, save for costs in the event of opposition.
[12] The application is opposed by the First, Second and Third Respondents.
[13] The Applicants all ege that this court has jurisdiction to determine this
application in terms of sections 1, 6, and 8 of the Promotion of Administrative Justice
Act 3 of 2000 (“PAJA”).
Factual Background
[14] The factual background underpinning this application may be summa rised
thus: In an affidavit deposed to by Mr Lukhanyo Sikwebu (“Mr Sikwebu”) , a
shareholder and director of the Second Applicant, Indy, the Applicants alleges that
they, on 10 March 2022, lodged an application for the Foreign Film Incentive for the
production Hammarskjold. The film is being produced by HPL and Indy. Indy is a
52% black -owned company which was incorporated in 2017. According to the
Applicants, Indy lay dormant until HPL, a newly incorporated company made an
application to the film unit of th e Department for an incentive. The date for
application to the film unit of th e Department for an incentive. The date for
commencement of production was 28 June 2022. The application was therefore in
full compliance with the mandatory conditions set out in clause 4.2 of the Guidelines
which require that an application of this nature must be completed and submitted not
earlier than forty -five calendar days prior to the commencement of principal
photography. Clause 4.2.1 obliges an applicant to register s Special Purpose
Corporate Vehicle (“SPCV”) in South Africa solely dedicated to th e production and/or
post production activities of the project. The SPCV must be a legal entity in terms of
the Companies Act of 1973, or 2008, or the Co -operatives Act. HPL is the SPCV for
this purpose. According to the Applicants, HPL was going to be resp onsible for all
production and post-production activities in South Africa.
[15] The applicant Eligibility Criteria for the incentive are set out in paragraph 5 of
the Guidelines as follows:
“5.1.1Compliance with Broad Based Black Empowerment (B-BBEE)
5.1.1.1The SPCV and holding company must be in compliance with the
requirements for Broad Based Black Economic Empowerment (B -BBEE
Codes of Good Practice (refer to http//bee.thedti.gov.za).
5.1.1.2 The holding company must achieve at least a level (3) B -BBEE
contributor statues in terms of B-BBEE Codes of Good Practice;
5.1.1.3 The SPCV must achieve at least a level four (4) B -BBEE Codes of
Good Practice;
5.1.1.4 The SPCV and holding company must submit a valid B -BBEE
certificate of compliance issued by an acc redited verification agency or an
affidavit at application stage.”
[16] The incentive applied for by the Applicants is R12 000 000. It thus exceeds
R10 000 000 but is less than R50 000 000.
[17] Pursuant to the lodgement of the application, the Applicants and the film
incentive unit of the Department, exchanged emails, wherei n the latter enquired
about the financing for the film from the Swedish Film Institute. It is apparent from
the emails that the exchange was from Ms Marlow de Mardt (“Ms de Mardt”) of the
the emails that the exchange was from Ms Marlow de Mardt (“Ms de Mardt”) of the
Applicants utilizing her email from DO Productions (Pty) Ltd Film an d TV Producers ,
“which is a company wholly owned by Marloe de Mardt & Brigit Olen” while Indy is
“52% owned by Ian Gabriel and Lukhanyo Sik and 48% owned by Marlow De Mardt
+ Brigid Olen”. Amongst the emails exchanged, one was sent by Mr Dimakatso
Kgomo (“Mr Kgomo”), the Deputy Director of the unit on 28 March 2022 requesting
further information concerning the film’s funding and seeking:
“… more clarity on the current Service Company [i.e. Indy] and its relation to
DO Productions, the reason for now using a new entity that has never traded
before or produced any work to date. If this was for transformation, why was it
not done under the Service Company already in production/business and has
been accessing the incentives.”
[18] Ms de Mardt responded to this email on 29 March 2022 and explained that:
“Indy Pendant was first registered in 2017 and the intention was always that
Indy Pendant will be a collaboration with Ian and Luke and act as the service
company for international projects as well as to develop a nd execute local
projects so we registered this company to be ready to service all work going
forward.
We were unable to secure any international work whilst our claim on “438”
days remained unpaid. This payment was finally settled in September 2020.
So between waiting for this claim to be paid and the industry to start up again
after COVID there was a delay of 3 years during which time we did not
produce any projects.
DO Productions main function is to obtain and secure the potential projects, to
develop and co -develop projects from abroad with our long established track
record and experience which is well known and respected in the international
industry.
Our intention in establishing the Service Company Indy Pendant Film Pty Ltd
with our partners Ian and Luke is to diversify our business model between DO
Productions with the main focus on securing international projects and Indy
Pendant Films, which will be the dedicated physical production service
company executing international projects confirmed for filming in South Africa.
Our partners Ian and Luke will also focus on development of local content and
series under the banner of Indy Pendant Film.
Our intention with the establishment of Indy Pendant Films, that will be the
exclusive 9physical pro duction service company and local content
development arm, and retaining our long established company DO
Productions was to:
A. Focus on transformation and provide our partners with the opportunity to
participate and grow in the international service arena an d in turn make
sure we are compliant with the BEE and DTI regulations.
B. Retain our presence and network under the reported brand DO
Productions and continued to develop and secure international projects for
South Africa.
C. Grow Indy Pendant Films and establish this as a brand/entity over time.”
[19] On 31 March 2022, Mr Kgomo responded to the above email and stated that
the Department would engage with its legal unit regarding the new entity and would
thereafter provide further guidance. On 19 April 2022, Mr K gomo indicated in yet
another email that the question of empowerment compliance was being considered
and required further information:
“1. Will PRODUCTIONS be involved in this production, if so, what services
or activities will it provide, and at what cost.
2. Profit share agreement and shareholder’s agreement.
3. Financial statements and BEE Certificate or Affidavit for DO
PRODUCTIONS.
4. Contact details of the black shareholders and their profiles/CV’s.
5. Reasons on why the shares are held directly and n ot by DO
Productions?
6. Clarity on whether Do Productions will still be an applicant an under
which conditions, since it seems to the key to the success of this
Service Company?”.
[20] Mr Kgomo also stated that “[t]here is a risk that a detailed assessment at a
later stage might result in the entity not being compliant with the BBEEE Act and
there is also a possibility of circumvention due to the use of both/multiple entities to
access the scheme for the benefit of specific shareholders.”
[21] On 27 April 2022, Ms de Mardt responded and explained, inter alia, that:
21.1 although DO Productions had sourced the project, all production would
be serviced through the service company and its dedicated SPCV, HPL;
21.2 DO Productions was not an applicant, and the relevant parties to the
application (Indy and HPL) held requisite levels of black ownership to meet
the Guidelines;
21.3 the empowerment of DO Productions itself was therefore not relevant
to the application. Moreover, to introduce black ownership into DO
Productions would be ab expensive transaction for which the black owners
would need to find finance as DO Productions had been in business for a very
long time and its value was considerable; and
21.4 DO Productions would however maintai n an ongoing relationship with
Indy as a source of projects into the future.
[22] Further communication between the parties led to the crucial email of 30 May
2022 wherein Mr Kgomo stated that:
“Unfortunately, your current structure and history of the shar eholders pose a
potential risk in terms of compliance with the B -BBEE Act and as such we will
be seeking advice from the BEE Commission, in the context of the history of
previous support received through DO Productions (Pty) Ltd. The aim of the
incentive scheme is to also drive its beneficiaries within the industry towards
meaningful transformation and in this case, one can argue the transformation
should happen in DO Productions (Pty) Ltd.
We understand that you were trying to “transform” outside the of t he
beneficiaries (DO Productions (Pty) Ltd) and that you would like to proceed in
benefitting through a new not transformed but “black -owned” structure? (This
in itself poses a lot of questions on compliance, but we will have to engage
the experts on this subject.)
In the meantime we also advise that you ensure that the SPCV (start -up
enterprise) submits a Qualifying Small Enterprise (“QSE”) scorecard since it is
applying for an incentive higher than R10 million.
In terms of B-BBEE Act, a Start-Up Enterprise must submit a Qualifying Small
Enterprise (“QSE”) scorecard when tendering for any contract or seeking any
other economic activity covered in terms of section 10(1) of the B -BBEE Act,
which have value higher th an 10 million and for contracts of R50 million and
for contracts of 50 million or more, they are required to submit a Generic
scorecard applicable to large entities.
NB: We also advise you to approach the commission for an opinion on the
compliance of the new structure and we urge you to disclose the full history of
the shareholders and DO Productions (Pty) Ltd, including that it has benefitted
from the Film and TV incentive scheme. Also mention that one of the
intentions of this new entity is to benefit from the film & TV incentive scheme.
You will need to share the outcome from the Commission on the above
request with the business unit, should you wish to reapply for the incentive.
The current application will be rejected and you will have to resubmit onc e we
have clarity on the matters raised in the email and can submit the applicable
BEE certificate.”
[23] In addition, it directs that HPL would have to use a Qualifying Small Enterprise
(QSE) scorecard and not provide a sworn statement. Whether the above email
constitutes a decision by the Department rejecting the Applicants’ application for the
incentive remains to be considered.
[24] The deponent to the founding affidavit Mr Sikwebu further avers that
subsequent to the rejection of the application by the Department through Mr Kgomo,
he sought audience with the Acting Director -General, Ms Molokoane as well as with
he sought audience with the Acting Director -General, Ms Molokoane as well as with
Mr Kgomo , seeking waiver of the Guidelines requirement to the effect that the
principal photography must not commence until an approval letter h as been received
from the DTI. On 8 June 2022, Mr Sikwebu wrote and email to Mr Kgomo and Ms
Molokoane stating the following:
“Warm greetings Nelly and Dimakatso. I trust you are well.
My name is Lukhanyo Sikwebu, Shareholder and Director of Indy
Pendant Films (Pty) Ltd. I am also Cast Coordinator on the feature film
Hammarskjold.
I took some time to draft you a letter regarding the serious and time -sensitive
situation we find ourselves in, regarding our DTIC application for a foreign film
and television production incentive.
I’ve written this letter because I am probably the most affected person in this
stalemate we have.
In the letter I have articulated our requests, the proven values of all our
shareholders, and also highlighted that our company structures and all of our
supporting documents are in harmony with the B -BBEEE Act, and also the
DTIC application regulations and prerequisites.
Please find my letter attached.
NB: I request an urgent meeting between all the parties involved in this
application (DITC and Indy Pendant Films representatives).
Secondly, I’d like to kindly remind you that we’re racing against time.
This is an urgent and time sensitive matter.”
[25] In an email of 24 June 2022, Mr Kgomo reiterated the rejection and declined
the request for a waiver.
[26] It is common cause that principal photography for the film commenced on 28
June 2022.
[27] Prior the reto, and on 9 June 2022 the Applicants addressed a query to the
BEE Commission and provided the facts pertaining to Indy and HPL and the
production of Hammarskjold . They also enquired whether a 52% black majority
owned company that has not previously app lied to the Department can apply for a
foreign film and production incentive. Ms Madidimalo Ramare of the Commission
responded to the query thus:
“Dear Lukhanyo
Thank you for your email.
Please note that in terms of the codes of good practice in of [sic] Statement
000, entities determine B-BBEE compliance in this manner:
B-BBEE compliance:
EMEs (annual revenue of R10 million and less) use a sworn affidavit or CIPC
certificate.
51% black ownership must be verified against the QSE scorecard by a
verification agency accredited by the South African Accreditation System.
The dtic has developed sworn affidavits templates for EME’s and QSEs.
Large entities with annual revenue of R50 million and above, and must be
verified against the large entity scorecard by a verification agency accredited
by the South African Accreditation System.
From the facts presented, the SPCV seem[sic] to be a start-up enterprise and
the codes of good practice have in paragraph 6 of statement 000 provided the
following with regard to start-up entities:
Start-up entities
Start-up enterprises are defined as the codes of good practice as recently
formed or incorporated entities that has [sic] been in operation for less than 1
year. S tart-up enterprise does not include any newly constituted or
restructured enterprise which is merely a continuation of a preexisting
enterprise or business.
For B-BBEE measurement, start -up enterprises are measured same way as
EMEs. However, a start -up ent erprise must submit a B -BBEE certificate
issued against the QSE scorecard when tendering for any contract, or seeking
any other economic activity covered in terms of Section 10 (1) of the B -BBEE
Act, which have a [sic] of between R10 million and R50 millio n. For contracts
or economic opportunities to the value of R50 million or more, the start -up
enterprise is required to submit a B -BBEE certificate issued against the large
entity scorecard.
Therefore, the SPCV if applying for an incentive that the value is between R10
million and R50 million, it cannot use the EME sworn affidavit and will have to
be verified by a SANAS accredited verification agency against the QSE
scorecard or large entity scorecard if the value is more than R50 million and
above.”
[28] The above explanation is best understood when read with the provisions of
section 10 (1) of the BEE Act which provide as follows:
“(1) Every organ of state and public entity must apply any relevant code of
good practice issued in terms of this Act in-
(a) determining qualification criteria for the issuing of licences,
concessions or other authorisations in respect of economic activity in
terms of any law;
(b) developing and implementing a preferential procurement policy;
(c) determining qualification criteria for the s ale of state -owned
enterprises;
(d) determining qualification criteria for entering into partnerships with the
private sector; and
(e) determining criteria for the awarding of incentives, grants and
investment schemes in support of broad -based black economic
empowerment.”
[29] The Applicants aver that as the Foreign Film Incentive is an incentive, only
paragraph (e) of section 10(1) is relevant to the issues in the present application.
The grounds of review
[30] The Applicants aver that the Department’s decision to refuse the application is
in terms of section 6(2) of PAJA and the principle of illegality vitiated by five
irregularities, namely:
30.1 The decision to refuse the Film Incentive application was based on or
materially influenced by an erroneous interpretation of the Guidelines and the
statutory scheme of the BEE Act;
30.2 The Department acted on the directions of the BEE Commission in
adopting the erroneous interpretation of the Guidelines and statutory scheme
and falls to be reviewed.
30.3 The decision was influenced by the empowerment credentials of DO
Productions whereas it should not have been, It therefore took into account
irrelevant considerations resulting in it being invalid.
30.4 Before 30 May 2022, the entire fil m industry knew and understood that
submitting a sworn statement to demonstrate the Level 4 contributor statues
credentials of the SPCV, was compiled with the requirements of the
Guidelines, even where the rebate applied for exceeded R10 million.
30.4.1 Based on previous applic ations that were accepted by the
Department, where a sworn statement was provided, the Applicants
had a legitimate expectation that the applications in future would be
assessed on the same basis.
30.4.2 Acting on this expectation, the Applicants complied w ith the
requirements of the Guidelines as they had been previously
understood, and applied by the Department in accepting applications
for the foreign film incentive.
30.4.3 Only on 30 May 2022 were the Applicants informed of the
Department’s changed view that the QSE scorecard was required,
when Mr Kgomo emailed the applicants.
30.4.4 This was less than a month before the principal photography
was set to begin, and at a stage when it was impossible for the
Applicants to satisfy the view expressed by the Department.
30.4.5 The Department entirely failed to give the Applicants any notice
of its changed view concerning the requirements; or an opportunity to
make representations concerning the changed view.
30.4.6 The Department accordingly unlawfully frustrated the Applicants’
legitimate expectation and acted unfairly.
[31] The Applicants further aver that the Department’s decision falls to be
reviewed because she acted arbitrarily – by failing to treat like cases alike whereas it
had publicly announced that a sworn affidavit (rather than a scorecard is acceptable)
This is particularly so because in the past other applications for the incentive in
excess of R10 million which used a sworn statement at application stage were
accepted, and the incentive was paid out.
[32] In the alternative, the Applicants contend that if indeed it is so that HPL was
required to comply with section 10(1) of the BEE Act and the Codes of Good
Practice, and was required to use a QSE scorecard, that would render the scheme
created by the Guidelines arbitrary and irrational.
[33] Turning to the Department’s refusal to waive the requirement of not
commencing with principal photography, the Applicants allege that the reason
provided for refusing to waive as it “cannot” grant a departure from the Guidelines
constitutes an incorrect interpretation of the Guidelines. According to the Applicants
this is so, because Paragraph 13.3 of the Guidelines grants the Department a
discretion to relax any of the “minimum requirements, conditio ns or terms in these
guidelines.”
[34] Second, the Guidelines are a form of policy and are not legislation or
subordinate legislation. The Applicants state that the Department has impermissibly
fettered its discretion by applying paragraph 4.3 of the Guidelines rigidly.
[35] Third, the decision is influenced by procedural irrationality because the
Department failed to consi der the relevant fact that the Applicants were put in this
position to have to request a waiver by its own failure to communicate the concerns
with the applicants timeously. According to the Applicants this is so because the
Department stated only on 30 Ma y 2022 that HPL had to use a QSE scorecard, and
that the application as it stood had to be rejected. This was 11 weeks after the
that the application as it stood had to be rejected. This was 11 weeks after the
application was made, and four weeks before they planned to start photography. The
final decision to reject the application was only made by the Department and
communicated to the Applicants on 24 June 2022 a mere four days before the
principal photography was to begin. The Applicants state that by that stage, HPL had
already taken all steps necessary to ensure that the principal photography would
commence - this included contracting with actors and service providers.
[36] The Applicants emphasize that by failing to process and decide the
application promptly – despite them having made the application more than three
months in adva nce ahead of photography , as well as their immediate responses to
the Department’s various queries, and attempts to consistently follow up with the
Department – the Department put the Applicants in a position where it was not
possible to make a new applic ation or challenge the final decision before the
principal photography was to commence.
[37] Accordingly, so further aver the Applicants, it was patently irrational and
arbitrary for the Department to fail entirely to consider the predicament in which it
had placed HPL when it refused to grant the waiver. Thus, the decision is reviewable
and falls to be set aside.
The Relief Sought
[38] The relief sought by the Applicants is three -fold in that they seek three
substantive orders. First, the Applicants ask f or orders to declare the impugned
decisions unlawful and unconstitutional. More specifically, the Applicants seek an
order declaring that paragraph 5.1.1.3 of the Guidelines to be irrational and therefore
unconstitutional, in terms of section 172 (1)(a) of the Constitution, to the extent that
this court finds that it required HPL to use a QSE scorecard. Second, the Applicants
ask for the reviewing and setting aside of the impugned decisions in terms of section
8(1) of PAJA and section 172 (1)(a) of the Cons titution. Third, in light of the fact that
the Department has interpreted in the present matter, the provisions of the
Guidelines which were issued in July 2018, the Applicants ask in terms of section 9
of PAJA or common law, for an order extending the 180 day period in section 7(1) of
PAJA to the date the application is instituted. In addition, should the court grant the
PAJA to the date the application is instituted. In addition, should the court grant the
relief in respect of paragraph 5.1.1.3 of the Guidelines the Applicants further ask for
an order reading in the words “which may be demon strated by use of an affidavit in
terms of paragraph 5.1.1.4” after the word “Practice” at the end of the paragraph.
They allege that such relief will cure the irrationality of the Guidelines.
[39] With regard to the substitution order s, the Applicants req uest first, an order
substituting the Department’s refusal to waive the requirement of not commencing
with principal photography before prior approval, with a decision waiving the
requirement with retrospective effect from 28 June 2022 (when principal photography
commenced.
[40] Second, the Applicants request an order substituting the Department’s
decision to refuse the film incentive application, with a decision accepting the
application. They contend that the circumstances in casu are exceptional. This i s
because due to the Departments erroneous interpretation of both the requirements
of the guidelines and its discretion to waive the pre -commencement requirement, the
Applicants were placed in a position where they had to commence with the principal
photography even though the application was refused. Furthermore, so goes the
contention, if the Department had correctly applied the Guidelines and statutory
scheme under the BEE Act, and acted promptly, the application would have been
accepted and there would have been no need for the Applicants to require a waiver
of the pre-commencement requirement.
[41] According to the Applicants, this court is in as good a position as the
Department to accept the application and grant the waiver as it is ultimately the
arbiter of the legal issues in dispute herein, and the correct interpretation of the
Guidelines and statutory scheme adopted by it will bind the Department. M oreover,
because the decision to refuse the application was solely based on the Department’s
erroneous interpretation of the Guidelines and statutory scheme, there is no utility in
remitting the matter back to the Department once the correct legal position has been
established. In similar vein, this court is also well -placed to decide that it would be
plainly irrational and arbitrary to refuse to waive the requirement, as that would
effectively preclude the Applicants from being able to claim the incentive.
effectively preclude the Applicants from being able to claim the incentive.
[42] The Applicants reiterate that the court is entitled to substitute the decisions of
the Department as the results are forgone conclusions for the following reasons:
42.1 Once the correct legal position has been confirmed regarding the
proper interpretation, there would be no reason to refuse the application;
42.2 There would be no reason to decline to grant the waiver retrospectively
as no other decision in the circumstances could be rational.
[43] Furthermore, any further delay (in addition to the del ays of the Department in
processing the application), in the decision being finali sed and in obtaining waiver,
would cause material prejudice as the Applicants relied on the incentive to fund the
film. Therefore, the granting of the waiver retrospectively is both appropriate and just
and equitable relief.
Lack of effective internal appeal process
[44] The internal appeal process is governed by paragraph 14.1 of the Guidelines
which provides as follows:
“Any dispute relating to a decision (including the reje ction of an application,
cancellation or reduction of a claim) taken by the dti is limited to one internal
appeal per application lodged.
Such an appeal must be submitted within 30 days of the letter of notification.”
According to the Applicants, the appeal process if flawed because first, once a final
decision has been made by a decision -maker, it is functus officio. If a statute does
not create a right of appeal to an appeal body, that decision cannot be overturned
pursuant to an appe al process created in a policy document. An official of the
Department cannot vary or revoke a decision that has already been taken by the
Department. Second, paragraph 14.1 does not specify on what grounds an appeal
may be lodged, who the appeal authority is, the procedures for the appeal, or the
remedies that may be granted in the appeal. Accordingly, there is no manner in
which the Applicants can assess whether an appeal would provide any form of
effective or adequate relief. Third, as the Guidelines are silent in this regard, the
appeal could be determined by other officials of the Department, rather than external
appeal could be determined by other officials of the Department, rather than external
people. Accordingly, the Applicants are not required to exhaust internal remedies,
but should a duty to do so be found to exist, it is in the interests of justice to exempt
the Applicants from complying with it because:
44.1 The issues raised in the review pertain to the proper interpretation of
the guidelines and statutory scheme – these are legal questions which the
court is appropriately plac ed to determine. An internal body would not be in a
position to make final determinations of the legal issues raised in this
application;
44.2 The Department’s conduct and delays have already caused prejudiced
to the Applicants - any further delays associa ted with an appeal and a
possible review thereafter would exacerbate that prejudice.
The answering affidavit
[45] In the answering affidavit deposed by Mr Kgomo, the First to Third
Respondents (“the Respondents”), oppose the Applicants’ application mainly on the
basis that it did not meet the eligibility criteria set out in the Guidelines to qualify for
an incentive.
[46] Mr Kgomo explain s the process followed by the Department in dealing with
applications received and states that upon receipt applications are screened for
compliance with minimum requirements for for that particular incentive. Thereafter,
the application undergoes processing which entails verifying the information supplied
and due diligence. Once the screening is completed and the application is deemed
compliant, it can be placed before the Adjudication Committee for consideration on
the merits. The Adjudication Committee is comprised of professionals from various
sectors who are skilled in incentive administration, broadcasting, revenue, services
(SARS), film and/or industry development. The Committee then considers t he merits
of the application, budget availability, and its overall compliance.
[47] It is common cause that the Applicants’ application did not reach the stage of
serving before the Adjudication Committee.
[48] Mr Kgomo explains that in the present matter an application was received
from the First and Second Applicant. A file was opened by staff members designated
for this purpose and escalated to his office for quality checking , final screening and
determination whether it was ripe for referral to the Adj udication Committee. He
states that upon perusal of the file, he immediately recognised the name of Ms de
Mardt as it appeared on the application form. The reason he was able to recognise
Ms de Mardt’s name is because he had dealt with her on several prior occasions
concerning film incentive applications on behalf of a well -established film production
company known as DO Productions. Mr Kgomo further avers that DO Productions
has over the years, even prior to 2018 been a beneficiary of numerous incentives
from the Department and has been awarded millions of Rands. He states that he
was surprised that the application whilst bearing the name of Ms de Mardt which he
associated with an established film and television production company, was being
brought under t he name of unheard of, and new entrant, Indy Pendant, the Second
Applicant. Mr Kgomo states that from gleaning the Department’s records, he was
able discern that DO Productions was owned by Ms de Mardt and Ms Olen wit a
level 4 B-BBEE rating.
[49] According to Mr Kgomo, without improving the score, i.e, transformation, DO
Productions would not meet the eligibility criteria set out in the Guidelines. It is
undisputed that Ms de Mardt and Ms Olen’s ownership of Indy is 48% whilst 52% is
owned by Gabriel and Mr Sikwebu. Indy Pendant has a B -BBEE level rating of 2.
Based on information supplied in the application documents, it formed an opinion,
that Ms de Mardt was exercising control of Iny Pendant because:
49.1 Ms de Mardt is cited as the contact person for Indy Pendant;
49.2 She is cited on the papers as one of the company directors;
49.3 The company registered addresses for both DO Productions and Indy
49.3 The company registered addresses for both DO Productions and Indy
Pendant are the same;
49.4 The Applicants’ application for the incentive was lodged by Ms de
Mardt and he d ealt with her throughout, over a period of about three months.
Mr Sikwebu first featured on 8 Jube after he (Kgomo) had already made the
decision to decline the application.
[50] In Mr Kgomo’s opinion, this kind of arrangement defeated the B -BBEE
requirements that had been introduced by the Department in the Guidelines in order
to effect transformation. He also noted during the screening process that one of the
Mandatory Conditions in clause 4.1.2 of the Guidelines, namely, that the Applicants
must have se cured 80% of the budget at application stage had not been met. This
prompted him to relay to Ms de Mardt the following missive dated 28 March 2022:
“Dear Marlow
Thank you for taking my call today.
Please note that the finance letter from the Swedish F1 wh ich accounts for
11,5 is still on LOI and you must have secured 80% of your funding at this
stage Another issue is that we need more clarity on the current Services
Company and its relation to DO Productions, the reason for now using a new
entity that has never traded before or produced work to date.
If this was for transformation, why was it done under the Service Company
already in production/ business and has been accessing the incentive?
I will engage with our colleagues, but in the meantime it will be very helpful if
we can get clarity and any supporting info on the above.”
[51] The issue concerning the financing by Swedish FI was resolved as the
Applicants later produced the requisite confirmation.
[52] Mr Kgomo avers that his engagement with colleagues within the unit yielded a
similar response, viz, that in order for true transformation to be achieved as intended,
internal restructuring at DO Production level was required. Ms de Mardt responded
to this query the following day on 29 March 2022 and expl ained in the email already
referred to in the founding affidavit. In that email Ms de Mardt gave a full explanation
of the reasons Indy Pendant (Pty) Ltd was formed. In a further email dated 20 April
2022, Mr Kgomo sent an email wherein he requested furthe r information regarding
DO Productions. These were profit share agreement and shareholder’s agreement
DO Productions. These were profit share agreement and shareholder’s agreement
as well as financial statements and BEE certificate or affidavit for DO Productions.
[53] Whilst p rotesting that the information relating to DO Production s was
irrelevant in the consideration of Indy Pendant’s eligibility to receive the incentive, Ms
de Mardt nonetheless provided the required details. Ms de Mardt gave a detailed
response. I find it necessary to quote copiously it.
“1. As laid out in my earlier emails, DO Productions Pty Ltd secured this
project. We have been in discussions with Swedish Producer since May 2020.
DO Productions will hand over the physical production to the service company
Indy Pendant Film Pty Ltd. As a company DO Productio ns will not involved in
the service production of “Hammarskjold”, but naturally there will be benefits
to Indy Pendant the service company by being associated with DO
Productions.
2. There are no separate profit share agreements or shareholder’s
agreements. Indy Pendant and the SPCV are each regulated by standard
form of MOI prescribed under the Companies Act. There is only one class of
shareholder in each of these companies and there is no differentiation in
shareholding rights and economic benefit enjoyed by the shareholders. They
all enjoy the same rights in proportion to the shareholding. No shareholder’s
agreements have been concluded. The relationship between shareholders is
regulated by the standard form MOIs and the Companies Act.
3. The relevant p arties in this application are Indy Pendant +
Hammarskjold the SPCV. There should be no need nor obligations to provide
financial statements for DO Productions, however, in the interests of
transparency and the fact that you find this important, they are a ttached. The
value of DO Productions, however, is not on paper but rather connected to
Brigid Olen and Marlow de Mardt’s experience + intellectual capital.
4. Our partners are Ian Carthew -Gabriel/i[…] 0[…] +Lukhanyo Sikwebu /
l[…] 0[…]/ Cv’s attached.
5. DO Productions has a trading history amd a value linked to both Malow
de Mardt + Brigid Olen. Accordingly, if DO Productions itself was to be
transformed, there would be a finance cost to be borne by any new BBBEE
shareholders. Rather than grappling with this issue, which is common to all
shareholders. Rather than grappling with this issue, which is common to all
empowerment transactions, we chose to set up a new entity. This was the
most efficient structure which allowed the 2 new s hareholders to be part of a
new company rather than the relevant share% in DO Productions being
bought by these new shareholders.
This way, through the relationship between the parties DO is able to add
considerable value and an opportunity share in the experience we bring to the
new company without a transactional cost to the new shareholders.
6. It is certainly not the intention for DO to be an applicant going forward.
DO Productions will abide by the regulations as stipulated by the DTIC.
The intention is to use Indy Pendant starting with this production going
forward. The success of Iny Pendant is dependant on the success of the
current project as is the case in this industry. We cannot as a new company
predict the future. Naturally we hope for commerc ially viability and on going
success and good collaboration with our new partners,
Now that you have received the LOC from the Swedish Film Institute we meet
the requirements of 80% funding secured.
Dimakatso could you please confirm that our provisional a pplication will go
before the board at the meeting tomorrow Thursday 28 April?”
[54] Mr Kgomo avers that after perusing the above explanation from Ms de Mardt,
he considered the matter further, and having conferred with colleagues , came to the
conclusion that the application did not meet all the criteria set out in the Guidelines.
He dispatched a letter to this effect to Ms de Mardt on 30 May 2022. The letter
concludes thus:
“The current application will be rejected and you will have to resubmit once we
have clarity on the matters raised in this email and can submit the applicable
BEE certificate.”
According to Mr Kgomo, the letter of 30 May constituted the final decision to refuse
the incentive application and any future application would be considered on
materially different additional information such as BEE Commission opinion on the
issues highlighted and a QSE scorecard. His office was therefore functus officio ,
thus, Ms de Mart was encouraged to submit a new application in the future.
[55] The above decision prompted the Applicants to request the Department to
[55] The above decision prompted the Applicants to request the Department to
release them from the waiver as already outlined in the factual background. Mr
Kgomo states that seeing that the request to waiver was made after the decision was
issued, it could not be granted.
[56] It is common cause that on 8 June 2022, Mr Sikwebu wrote to Mr Kgomo and
Ms Molokoane attaching more information that indicated that, in his opinion, their
company structures were B -BBEE compliant. Mr Kgomo states that Mr Sikwebu’s
email was i rrelevant as the decision had already been reached in the email of 30
May 2022. However, he responded to his email re-affirming the decision he claims to
have reached already. Given the issues in this application, his response must be
fully recorded.
“Dear Lukhanyo and Team. I hope you are well.
Please note that as per my discussion with Marlow on the matters which led
to your application being rejected, we still stated the following.
We unfortunately cannot with the application or peovide any waivers from any
requirements of the guidelines, the business unit and the Adjudication
Committee do not grant waivers. The guideline is clear in that the project must
not have commenced with principal photography.
I bring your attention to the following requirement of the applicable guidelines:
"4.3 The principal photography must not commence until an approval letter
has been received from the dti.”
We have previously advised you to approach the B -BBEE Commission for an
opinion on your current structure and related par ties/emtities who have
previously benefited from the incentive (see attached email). This poses a
material risk to you being able to pass the final verification, should uou receive
a Form A approval.
We have also advised you on the requirement of QSE scorexard based on the
following:
“Qualifying Small Enterprise (“QSE”) scorecard when tendering for any
contract, or seeking any other economic activity covered in terms of Section
10(1) of the B-BBEE Act, which have a value higher than “R10 million but less
than R50 million”, this affects SPCV’s which are classified as a start -up
than R50 million”, this affects SPCV’s which are classified as a start -up
applying for incentive greater than R10 million (see attached guide). This
affects all applicants and not only this project.”
Please advise if the email below and its attachments const itute your formal
appeal? If this is true, your request will be forwarded to the relevant business
units for consideration.”
[57] The above letter read with the one of 30 May 2022 according to the
Department constitute s its final decision. In response th ereto, on 24 June Ms de
Mardt and Mr Sikwebu indicated in a letter that the Applicants were not intent on
lodging an appeal and would be consulting with Senior Counsel. Mr Kgomo states
that this was the first time that Ms de Mardt wrote under the letterhead of Indy and
signed as director and of the company as previously she had been communicating
under the logo, stationery and signature of DO Productions. This according to his
affidavit supports his notion that the arrangement between Indy P endant “bears
hallmarks of circumvention of the B -BBEE Act and Codes ” particularly when regard
is had to Ms de Mardt’s email of 23 April wherein she stated, inter alia, that the
project was secured by DO Productions but the physical production would be
handed over to Ind y Pendant. He describes the relationship between Indy Pendant
and DO Productions as “obscure and undocumented” . According to his evidence,
Indy “appeared to be a vehicle to assist DO Productions to benefit from the incentive
program where DO Productions, o n its own, and as currently structured would be
unable to qualify for the incentive benefits as it had previously”. According to Mr
Kgomo, this rendered the status of Indy Pendant as a service company dubious and
this is was caused the Department to seek DO Productions and Indy Pensant to self-
report and seek advice on from the BEE Commission, which they failed to do.
[58] Furthermore, the arrangement of Ms Mardt and Ms Olen (also referred to as
Goldman) being a link between the two companies, Indy Pendant and DO
Productions struck him and the Department’s officials in the unit as strange. Mr
Productions struck him and the Department’s officials in the unit as strange. Mr
Kgomo, avers that it is similarl y strange that Mr Sikwebu and Mr Gabriel did not
participate in the discussions or seek to address the issues raised in his queries
relating to the B -BBEE, transformation and risk of circumvention. He expresses an
opinion that had they indeed been actively involved in the management and
administration of Indy Pendant he expected to say something. Instead, it was only
after he had made the final decision on 30 May 2022 that Mr Sikwebu featured. In
short, Mr Kgomo insinuates fronting, in contravention of tran sformation and the BEE
Act. In fact he outrightly states that he finds it surprising to see Mr Sikwebu
“quibbling with these DTIC and government policies on transformation in the Film
and Television Production industry”.
[59] The Department alleges that th ere have been subsequent events which have
overtaken the scorecard issue in this matter, and which have rendered this matter
moot, even prior to the institution of the review proceedings. These are that a new
Film and Television Interpretation Note has been issued effective 1 September 2022.
The relevant section of the Interpretative Note reads as follows:
“In the event that the Holding (service company) and the SPCV are seeking
an incentive greater than R10 million and are unable to provide a B -BBEE
certificate issued in terms of either a QSE scorecard or Generic scorecard at
application stage, due to Holding (service) company and/or the SPCV being
an early stage start-up enterprise, the Holding (service) company and/or PCV
is to submit a sworn affidavit wh ich will be considered for support. This is on
condition that the applicable (QSE or Generic) certificate will be required at
the first claim for both the Holding (service) company and the SPCV, in line
with Broad -Based Black Economic Empowerment Codes of Good Practice,
issued in terms of Section 9 of the Broad -Based Black Economic
Empowerment Act of 2003, as amended.”
“For avoidance of doubt: Submissions of a sworn affidavit will be required at
application stage but the relevant valid QSE or Generic certif icate must be
submitted at claim stage for the successful processing of the claim.”
[60] However, Mr Kgomo stresses that the decision to refuse the incentive
application herein was not made only on the basis of the QSE scorecard. In addition,
the Interpretation Note does not have a retrospective effect.
[61] Regarding the waiver, Mr Kgomo reit erates that Ms de Mardt’s request to
waive the peremptory requirement not to commence with principal photography until
waive the peremptory requirement not to commence with principal photography until
after an approval letter was received was made subsequent to the final decision. In
any event, so further avers Mr Kgomo, there are inher ent dangers in waiving the
requirement under clause 4.3 of the Guidelines as this would create an expectation
for an approval even before the consideration of the merits. In the present case, it
would have exposed the Department to an unauthorised expenditure of some R12.5
million Rand in contravention of section 38 of the Public Finance Management Act 1
of 1999 (“the PFMA”). Likewise, such a waiver is precluded by Treasury Regulations
providing that an official of an institution may not spend or commit public money
except with the approval (either in writing or by duly authorised electronic means ) of
the accounting officer or a properly delegated or authorised officer.
[62] Insofar as substitution is concerned, Mr Kgomo denies that in casu there are
exceptional circumstances justifying the substitution of the decision of the
Department. According to his affidavit, the issues in this matter are not purely legal.
He further states that the assailed decision was taken at the screening stage of the
application and was rejected due to failure to comply with minimum guidelines, and
substitution would b ypass the Adjudication Committee, the administrative decision
maker which deals with the substance of the application. Moreover, in terms of the
Guidelines, the approval of any application is subject to availability of funds,
compliance with incentive guid elines and relevant provisions of the Public Finance
Management Act 1 of 1999. Because the D epartment works within a budget and
depending on the number of approved applications within a specific financial year,
funds may become depleted. For this reason, substitution would be inappropriate in
the circumstances.
[63] Regarding the Applicants’ attack of the appeal process, Mr Kgomo avers that
the Applicants did not enquire as to the appeal mechanism that was available to
effect an appeal. Had they done so, a copy of the terms of reference of the DTIC Ad
Hoc Decision Review Committee adopted on 18 October 2021 would have been
made available to them. He further explains that in terms of clause 8(1) thereof, the
made available to them. He further explains that in terms of clause 8(1) thereof, the
Ad Hoc Decision Review committee serves as an appe al committee on decisions
made across all incentive programmes. The Commit ee may uphold, dismiss or refer
back for investigation or to obtain further information to clarify certain issues on the
appeal/s concerned.
[64] Mr Kgomo alleges that the Applicants were aware of clause 14.1 of the
Guidelines and were required to exhaust internal remedies before launching this
application. According to Mr Kgomo, the internal remedy is effective, available and
adequate and the Applicants’ refusal to exhaust internal r emedies is unjustifiable.
Furthermore, by refusing to pursue the appeal process, the Applicant seek to
undermine the autonomy of the DTIC administrative process and seek for the court
to usurp the executive role and function of the Ad Hoc Decision Review Committee.
The replying affidavit
[65] In the replying affidavit, Mr Sikwebu stressed that the Department’s email of
30 May 2022 was not a final decision as the BEE Commission was to investigate
certain issues. He also points out that what is clear from t he affidavit of Mr Kgomo is
that the thrust of the opposition is that the Department considers Indy to be fronting
for DO Productions, which he emphatically denies. Regarding the allegation of
circumvention, Mr Sikwebu retorts by stating that the credentia ls of DO Productions
are irrelevant in the consideration of an application filed by Indy Pendant
notwithstanding the fact that it appears that Applicants’ application for the incentive
was rejected because of DO Productions’ BEE status. Furthermore, that DO
Productions sourced the project and handed it over to Indy Pendant is to the
advantage of the majority shareholders (Mr Sikwebu and Mr Gabriel) as it exposes
them to an international production through a business they own. Mr Sikwebu further
states that the contentions made by the Department to this end, impugn his integrity
and character.
[66] As to the Department’s suggestion that Ms de Mardt exercised control over
Indy, the Applicants vehemently deny that this is so and explain that Ms de Mardt
was tasked with ensuring the success of the applicatio n because of her experience.
Furthermore, each of the shareholders have different roles within the company. Mr
Sikwebu states that there was nothing nefarious about the fact that Ms de Mardt is
the only one who dealt with the Department initially.
the only one who dealt with the Department initially.
[67] Regarding the Department’s Interpretation Note to the effect that at an
affidavit may be accepted in lieu of a scorecard as having no retrospective effect,
the Applicants contend that same is supportive of its case because when one
interprets a document, one is not amending it and the meaning does not change
from one day to the next.
[68] As to the Ad Hoc Review Committee , the Applicants state that a guideline or
policy cannot provide a public body with authority to revoke a decision already taken
as that would be inconsistent with a functus officio doctrine.
Issues for determination
[69] Flowing from the factual background, this matter raises the following issues:
69.1 Is the decision of the First Respondent of 30 May and 24 June rejecting
the Applicants’ application irrational and unconstitutional? Are they in any
event administrative decisions as envisaged in PAJA?
69.2 Should the Applicants be non-suited on the basis that they approached
this court without first complying with the provisions of section 7(2)(a) of
PAJA, or have they established exceptional circumstances entitling them to
exemption from the aforesaid section? Linked to this issue, is the
consideration of whether the internal appeal process provided in the
Guidelines constitutes an effective remedy.
69.3 Was the Department entitled to rely on section 10(i)(e) requiring it to
include B -BBEE status levels as well as on the scorecard as criterion for
eligibility to refuse the incentive justified?
69.4 Do the circumstances of this matter establ ish exceptional
circumstances that affords a court the discretion to make a substitution order
in terms of section 8(1) (c) (ii) (aa) of PAJA.
69.5 Is the decision of the Department refusing to condone/wa ive the
Guideline requirement that the Department ap proval should precede principal
photography rational, constitutional or justifiable?
Do the decisions assailed constitute administrative action as defined in PAJA?
[70] The Respondents in the answering affidavit seem to suggest that the
decision/s of the incentive unit are not administrative actions falling under the scope
of PAJA.
[71] Section 1 of PAJA defines administrative action thus:
“Administrative action means any decision of an administrative nature made .
. . under the empowering provisions [and] taken . . . by an organ of state when
exercising a power in terms the Constitution or a provisional constitution, or
exercising a public power or performing a public function in terms of any
legislation, or [taken by] by a natural or jur istic person and which has a direct
external effect. . .”
Whether particular conduct constitutes administrative action depends primarily on
the nature of the power that is being exercised rather than the person who does so.
(Grey’s Marine Hout Bay (Pty) Lt d and others v Minister of Public Works and others
[2005] ZASCA 43, 2005 (6) SA 313 at para 24. The court held that;
“Administrative action is rather in general terms, the conduct of the
bureaucracy (whoever the bureaucracy might be) in carrying out the d aily
functions of the State, which necessarily involves the application of policy,
usually after its translation into law, with direct and immediate consequences
the individuals or groups of individuals.”
PAJA defines an ‘administrative decision’ as a decision or action taken by an organ
of state or a person exercising a public power or performing a function, in terms of
any legislation or empowering provision.
[72] In Minister of Defence and Military Veterans v Motau and Others 2014(5)SA
69 (CC) explained thus:
“[33] The concept of ‘administrative action’, as defined s 1(1) of PAJA is the
threshold for engaging in administrative -law review. The rather unwieldly
definition can be distilled into seven elements: there must be (a) a decision of
an administrative nature; (b) by an organ of state or a natural juristic person;
an administrative nature; (b) by an organ of state or a natural juristic person;
(c) exercising a public power or performing a public function; (d) in terms of
any legislation or an empowering provision; (e ) that adversely affects rights;
(f) that has a direct external effect, and (g) that does not fall under any of the
listed exclusions.”
[73] In the matter at hand, the facts establish that the decision of the Incentive
Unit, through Mr Kgomo was made in the exercise of a public power, in the ordinary
course of considering and assessing applications for incentives and has direct
consequences on the Applicants. It therefore is administrative action as defined in
PAJA.
Failure to exhaust internal remedies
[74] The Department in the answering affidavit raises the fact that the Applicants
have approached this court prematurely as they have failed to pursue internal
remedies provided in the Guidelines. It is common cause in thi s matter that neither
HPL nor Indy Pendant made an attempt to appeal the decisions in issue. In seeking
an exemption from this requirement it was contended that, first, the issues raised in
the review pertain to the proper interpretation of the guidelines and statutory scheme
and are legal questions which the Court is appropriately placed to determine.
Furthermore, an internal body would not be able to make a final determination of the
issues raised in the application. Second, the Guidelines do not provid e an effective
internal remedy for the purpose of section 7(2) of PAJA.
[75] Section 7(2)(a) of PAJA provides that “no court or tribunal shall review an
administrative decision in terms of this Act unless any internal remedy provided for in
any other law has first been exhausted”. It is well to remind oneself of what was said
by the Court in Nichol and Another v Registrar of Pension Funds and Others 2008
(1) SA 383 (SCA) in connection with section 7 of PAJA para 15:
“Under the common law, the mere existenc e of an internal remedy, was not,
by itself, sufficient to deter access to judicial review until the remedy had been
exhausted. Judicial review would in general only be deferred where the
relevant statutory or contractual provision properly construed, requ ired that
relevant statutory or contractual provision properly construed, requ ired that
internal remedies first be exhausted. However, as is pointed out by Ian Currie
and Jonathan Klaaren, ‘by imposing a strict duty to exhaust domestic
remedies, [PAJA] has considerably removed common law’. It is now
compulsory for the aggrieved party in all cases to exhaust the relevant internal
remedies unless exempted from doing so by way of a successful application
under section 7(2)(c ). Moreover, the person seeking exemption must satisfy
the court of two matters, first, that there are exceptiona l circumstances, and
second, that it is in the interest of justice that the exemption be given.”
[76] in Koyabe and others v Minister of Home Affairs and others (Lawyers for
Human Rights as amicus curiae) 2019 (4) SA 327 (CC) at para 35, the Court
emphasised the importance of exhaustion of internal remedies and held that:
“[35] . . . [they] are designed to provide immediate and cost -effective relief,
giving the executive the opportunity to utilise its own mechanisms, rectifying
irregularities first, before aggrieved parties resort to litigation. Although courts
play a vital role in providing litigants with access to justice, the importance of
more readily available and cost -effective internal remedies canno t be
gainsaid.”
Regarding the exceptional circumstances in PAJA, it held that:
“[39] What constitutes exceptional circumstances depend s on the facts and
circumstances of the case and the nature of the administrative action at issue.
Thus, where an internal remedy would not be effective and/or where pursuit
would be futile, a court may permit a litigant to approach the court directly. So
too where an internal tribunal has developed a rigid policy which renders
exhaustion futile.”
[77] I now turn to consider the Applicants’ justification for not purs uing internal
remedies entitling them to the granting of the essential exemption. Section 7(2)(a) of
PAJA describes the internal remedy that must be exhausted as “any internal remedy
provided for in any other law”. In Eskom Holdings SOC Ltd v Vaal River
Development Association (Pty) Ltd and Others 2023 (5) BCLR 527 cc at para 218
the Court stated that:
the Court stated that:
“[218] … On the other hand, what need be exhausted before a court may
entertain a PAJA review are internal remedies. Hoexter and Penfold say
“internal” and “any other law” in the phrase “any internal remedy provided for
in any other law” must be “read restrictively to include only remedies
specifically provided for in the legislation with which the case is co ncerned
and to exclude optional extras”.
Against this backdrop I must assess the adequacy of the internal remedies assailed
by the Applicants.
[78] In this matter the Department attached to the answering affidavit a copy of the
terms of reference of its A d Hoc Review Committee (“the Review Committee”)
adopted on 19 October 2021. It is explained under the introduction that the Review
Committee acknowledges the need for Terms of Refe rence (ToR) as recommended
in the King IV report on Corporate Governance for South Africa – 2018. Clause 2
sets out the Committee’s roles and responsibilities as well as the requirements for its
compositions and meeting procedures. Clause 3 relates to composition and states
thus:
“(1) The Ad Hoc Decision Review Committee comprises of independent and
impartial officials that serve to guarantee the integrity and consistency of an
open and transparent funding process.
(2) The Director-General (DG) must appoint members of the Ad Hoc Decision
Review Committee, consisting of-
(a) Five (5) representatives of which (3) must be from the Department
of Trade, Industry and Competition (the dtic).
(b) Individuals who are qualified and experienced on the Fields of
Finance, Accounting, Economics and Law.
(3) The Ad Hoc Decision Review Committee Chairperson will be designated
by the DG.
(4) In the absence of the Chairperson, Members of the Committee will
nominate one of their members as Acting Chairperson.
(5) The Acting Chairperson shall have the same duties and responsibilities as
the Chairperson.”
[79] Clause 4 provides for the term of appointment of members of the Committee
as follows:
“(1) Members of the Ad Hoc Decision Review Committee –
(a) May be appointed for a period of 3 years by the DG;
(b) May be eligible for reappointment on expiry of the term.”
Clause 7 sets out the fiduciary duties of members of the Committee. Importantly, in
terms of clause 8(1), the Ad Hoc Decision Review Committee serves as an appeal
committee on decisions made across all incentive programmes. The Commit tee may
uphold, dismiss or refer back for investigation or to obtain further information to
clarify certain issues on the appeal/s concerned.
[80] Counsel for the Respondents contend ed that given the safeguards provided
for in the ToR, the internal remedy is effective, available and adequate, and that the
Applicant’s refusal to exhaust internal remedy mechanism in this case was
unjustifiable.
[81] Expatiating on the reasons why the remedy in the Guidelines does not
provide for an effective internal remedy under PAJA and that the Applicants had no
duty to pursue it, it was argued on behalf of the Applicants first, that once the
Department made its final decisions not to grant the waiver, it became functus officio
and it had no authority to revoke or vary th e decisions. That authority can only be
granted through enabling legislation. Furthermore, the Guidelines and the ToR of
the Review Committee do not in law grant the Department authority to revoke or vary
its decision because they are not remedies specif ically provided for in the legislation
with which this case is concerned. Second, the Guidelines do not specify on what
grounds an appeal may be lodged, who the appeal authority is, Third, in light of the
fact that ad hoc appeal body provides that official s in the Department may be
appointed to it, there is no guarantee that the appeal body would be sufficiently
independent to provide an effective remedy.
[82] It was further contended on behalf of the Respondents that the Applicants
were obliged to pursue internal remedies. In considering whether the Applicants
were obliged to pursue internal remedies. In considering whether the Applicants
should be non-suited on the basis that they approached this court without complying
with the provisions of section7 (2) of PAJA, I must place on record that the
Applicants have not, upfront made an application to be exempted from complying
with the aforesaid section. Section 7 (2) (c ) provides that:
“[a] court or tribunal may, in exceptional circumstances and on application by
the person concerned exempt such person from the obligation to exhaust
internal remedies if the court deems it in the interest of justice.”
[83] Notwithstanding the fact that the Applicants did not apply for exemption, I
must determine, based on the facts , whether such exceptional circumstances have
been established, and whether it is in the interest of justice to grant the exemption. I
say so because in Bato Star Fishing (Pty) Ltd v Minister of Environmental Affairs and
Tourism and Others 2004 (7) BCLR 687 (CC) the court a quo granted the applicants
leave to pursue the review without first exhausting the internal remedies, however, it
must be borne in mind that each case will be considered on its own facts.
Furthermore, the Constitutional Court in Bato Star at paragraph [17] cautioned that:
“[17] . . . Suffice to say that a court is minded to grant permission to a litigant
to pursue the review of a decision before exhausting internal remedies should
consider whether the litigant should be permitted simultaneously pursue to
pursue those internal remedies. In considering this question a court needs to
ensure that the possibility of duplicative or contradictory relief is avoided.”
[84] Section 7(2) (a) of PAJA describes the internal remedy that must be
exhausted as “any internal remedy that must be provided for in any other law” as set
out in Eskom Holdings, supra. It is common cause that the internal remedy set out in
the Guidelines is not provided for in any law. It therefore is a policy. As was restated
in Akani Garden Route (Pty) Ltd v Pinnacle Point Casino (Pty) l td 2001 (4) SA 501
(SCA) at para 7:
“I prefer to begin by stating the obvious, namely that laws, regulations and
rules are legislative instruments whereas policy determinations are not.
rules are legislative instruments whereas policy determinations are not.
[85] Given the status of the Guidelines , namely that they are not prov ided for in
any other law , it must follow that the PAJA duty to exhaust internal remedies is not
applicable to them. To further explain, b y way of comparison and analogy, an
example of statutory compliant appeal procedure is found in section 12 of the
National Arts Council Act no 56 of 1997.1
[86] In this matter, it is difficult to find that the internal remedy as reflected in the
Guidelines is effective, available and adequate for the following reasons:
86.1 First, the appeal remedy provides no statement of procedure remedial
scope, appeal authority and whether that authority is independent or not etc.
The Department’s adoption of terms of reference for an ad hoc appeal does
not address any of these issues. The result is that there is no manner in which
the Applicants can assess whether the appeal would provide any form of
effective or adequate relief.
86.2 Second, the Guidelines specify the grounds on which an appeal may
be lodged. The ToR of the appeal body provide that officials in the
Department will be appointed to it. However, they are silent on whether the
appeal could be determined by other officials of the Department or externa lly.
The troubling aspect is that there is no guarantee that the appeal body could
be perceived to be sufficiently independent, this being the hallmark of fairness
of procedures. In Koyabe, supra, para 12, the Court held that:
“An internal remedy is effective if offers a prospect of success, and can
be “objectively implemented, taking into account relevant principles and
values of administrative justice present in the Constitution and in our
law”; and available if it can be pursued “without any obstruction,
whether systemic or arising from unwarranted administrative conduct”.
[87] Flowing from the aforegoing, it stand s to reason that the Applicants should be
permitted to approach this court directly due to the ineffective appeal remedy . In
1 It provides thus: (1) Any person feels aggrieved at any action or decision that the Council has
taken or made in terms of this Act, may within 30 days from the date on which action or decision was
made known by the Council, and after having given notice t o the Council as prescribed, appeal to the
Minister in the prescribed manner.
(2) The Minister shall appoint one or more independent assessors with the knowledge of
the arts to assist him or her.
(3) The Minister may, after consultation with the assessor o r assessors, confirm, set
aside or amend any action or decision contemplated in subsection (1).”
addition, even if the appeal remedy could be said to be compliant, the issues raised
in the review pertain to the proper interpreta tion of the Guidelines and statutory
scheme and are legal questions which the court is appropriately placed to determine.
An appeal body would not be able to make final determinations of the issues raised
herein. For all these reasons the Applicants are ex empted from the requirement to
exhaust internal remedies as envisaged in section 7 (2) (a) of PAJA.
Application of the B-BBEE Act
[88] According to argument presented on behalf of the Applicants the BEE Codes
of Good Practice are not applicable to the Foreign Film Incentive Scheme, and
because it is an incentive, only paragraph (e) of section 10 (1) of the BEE Act is
relevant to this issu e. Even then, so continues the argument, under section (10)(1)
(e), the Department is only required to apply the relevant Codes of Good Practice
when it determines criteria for incentives in “support of broad-based black economic
empowerment”. The Foreign Film Incentive is not a scheme in support of broad -
based black economic empowerment as its main purposes do not include or support
broad-based black economic empowerment.
[89] This contention necessitates an outline of the B -BBEE Act statutory
framework. Section 1 defines broad-based black economic empowerment to mean:
“the viable economic empowerment of all black people, in particular women,
workers, youth, people with disabilities and people living in rural areas, through
diverse but integrated socio-economic strategies that include but are not limited
to the following six listed strategies:
(a) Increasing the number of black people that own manage, and control
enterprises and productive assets;
(b) Facilitating ownership and management of ent erprises and productive
assets by communities, workers, co -operatives and other collective
enterprises;
(c) Human resource and skills development;
(d) Achieving equitable representation of all occupational categories and
levels in the workforce;
(e) Preferential procurement from enterprises that are owned or managed by
black people; and
(f) Investment in enterprises that are owned or managed by black people.”
[90] Section 2 outlines the objectives of the BEE Act as follows:
“The objectives of this Act are to facilitate broad -based black economic
empowerment by –
(a) Promoting economic transformation in order to enable meaningful
participation of black people in the economy;
(b) Achieving a substantial change in the racial composition of ownership and
management structures and in the skilled occupations of existing and new
enterprises;
(c) Increasing the extent to which communities, workers, cooperatives and
other collective enterprises own and manage existing and new enterprise s
and increasing their access to economic activities, infrastructure and skills
training;
(d) Increasing the extent to which black women own and manage existing and
new enterprises, and increasing access to economic activities, infrastructure
and skills training.
(e) Promoting investment programmes that lead to broad -based and
meaningful participation in the economy by black people in order to achieve
sustainable development and general prosperity;
(f) Empowering rural and local communities by enabling access to econom ic
activities, land, infrastructure, ownership and skills;
(g) Promoting access to finance for black start -ups, small, medium and
micro=enterprises, co -operatives and black entrepreneurs, including those
in the informal business sector; and
(h) Increasing effective economic participation and black owned and managed
enterprises including small , medium, and micro -enterprises and co -
operatives and enhancing their access to financial and non -financial
support.
[91] Section 10 relates to the application of Codes of Good Practice. It provides
thus:
“Every organ of state and public entity must apply any relevant code of good
practice issued in terms of this Act in –
(a) Determining qualification criteria for the issuing o f licences, concessions
or other authorisations in respect of economic activity in terms of any law;
(b) Developing and implementing a preferential procurement policy;
(c) Determining qualification for the sale of state-owned enterprises;
(d) Developing criteria for e ntering into partnerships with the private sector;
and
(e) Determining criteria for the awarding of incentives, grants, and investment
schemes in support of broad-based black economic empowerment.”
[92] The Applicants contend that section 10 of the B -BEEE Act which stipulates
circumstances under which the BEE Codes should apply does not compel their
application to the Foreign Film Incentive.
[93] To recap, the Guidelines require that the holding company must achieve at
least three B-BBEE contributor status in terms of the Codes of Good Practice and
the SPCV must at least achieve four B -BBEE contributor status. In this matter, Indy,
as the holding company is compliant for it is 52% black owned. The status of HPL
as the SPCV is considered under the Scorecard analysis. It is undisputed that one of
the reasons for the rejection of the Applicants’ application is that DO Productions, the
company that sourced the film should have been transformed instead of a new entity
being set up. It is common cause that the owners of DO Productions, an established
entity in the business are two white women who are minority shareholders in Indy
Pendant. has previously benefitted from the incentive and would no t qualify under
the Guidelines. According to the Department, this is in line with its policy to transform
through the restructuring of existing entities. It is clear from the papers that the
through the restructuring of existing entities. It is clear from the papers that the
Respondents is suspicious that the corporate structure of Indy Pendant amounts to a
circumvention of the transformation requirements of the Guidelines and BEE Act.
[94] Counsel for the Applicants contended , first, that empowerment credentials of
DO Productions were an irrelevant consideration in the Applicants’ applicat ion for an
incentive. Furthermore, the Guidelines on their own terms do not require existing
entities in the industry, like DO Productions to be restructured to introduce black
shareholders. Moreover, they (the Guidelines) do not preclude shareholders of
existing entities from participating as shareholders in new entities that may apply for
an incentive. According to the Applicants, if the Department sought to require
existing entities to be restructured to include black shareholders – which is one of
many ways in which transformation can be achieved – then it had to adopt that as a
requirement in the Guidelines. Such a policy cannot be imposed by an official
determining an application for an incentive.
[94] Second, the Department’s suspicion that Indy and its majority black
shareholders, Mr Sikwebu and Mr Gabriel are fronting for DO Productions, and the
other shareholders Ms De Mardt and Ms Olen ignores the perfectly legitimate and
lawful rationale, for the parties to incorporate a new entity , rather than restructuring
DO Productions. It will be recalled that the explanation proffered by Mr Sikwebu is
that to be able to acquire “26% stake of DO Productions” , he would “have to attain a
debt of millions of Rands” . According to the Applicants, th e Department’s suspicion
of fronting ignores the fact that the four shareholders were entitled to structure their
business in this manner and there is nothing in the Guidelines that either explicitly or
implicitly that precluded them from taking this cour se of action. Besides, so further
continues the contention, the Department did not make an outright finding in terms of
paragraph 13.1 of the Guidelines which provides that “Any attempt to circumvent or
actual attempt at circumvention of these guidelines, which at the sole discretion of
actual attempt at circumvention of these guidelines, which at the sole discretion of
the dti, may allow who would otherwise not have qualified to qualify for this incentive
will lead to rejection of the application or claim”.
[95] Third, the BEE Commission has not indicated any concerns with the structure
of Indy and its compliance with the BEE Act as it made no comment in response to
an email of Mr Sikwebu wherein he raised the issue. Moreover, it was joined as a
party to these proceedings but elected not to participate notwithstanding the fact that
it is the primary functionary empowered to investigate such issues of fronting or
circumvention by section 13F of the BEE Act. According to the Applicants, its
decision not to participa te in the litigation is a good indication that the structure of
Indy Pendant does not violate the law or the Guidelines.
[96] Insofar as the application of section 10(1) of the BEE Act, the Applicants
contend that the BEE Codes of Good Practice are not au tomatically applicable to the
incentive scheme as a matter of law, contrary to the assertion by the Respondents
that they do. This argument is premised on two legs, namely, first that the section
10 of the B-BBEE Act, which stipulates circumstances under which the Codes should
apply, does not apply to the Foreign Film Incentive because B-BBEE is not objective
of the scheme. According to the Applicants only paragraph (e) of section 10(1) of the
BEE Act can be relevant to the issue in dispute. Under section 10(1)(e), the
Department is only required to apply the relevant codes of Good Practice when it
determines criteria for the awarding of incentives in “ schemes in support of broad -
based lack economic empowerment ”. Therefore, so continues the contention, if the
purpose of the scheme in question is not a scheme in support broad -based black
economic empowerment, then the Codes of Good Practice do not apply to the
scheme.-they are incidental to the purpose of the sch eme. Furthermore, the purpose
for the establishment of the scheme is apparent from the Guidelines.
[97] It is so that the purposes and objectives of the scheme are set out in
paragraph 2 of the Guidelines as follows:
“3.1 The South African Film and Televis ion Production Incentive
Programme is aimed at strengthening and promoting the country’s film
and television industry as well as contributing towards the creation of
employment opportunities in South Africa.
3.2 The objectives of the Foreign Film and Tele vision Production
and Post Production Incentive, a sub -programme of the South African
Film and Television Incentive Programme, is to attract large -budget
foreign-based films and television productions and post productions
foreign-based films and television productions and post productions
that will contribute towards empl oyment creation, and enhance the
international profile of the South African film and television industry
whilst increasing the country’s creative and technical skills base.
3.3 The Foreign Film and Television Production and Post -
Production Incentive is ava ilable to foreign -owned qualifying
productions and post-productions as follows:
3.3.1 The Qualifying South African Production Expenditure
(QSAPE) should be at least R15 million shooting on location in
South Africa.
3.3.2 The Qualifying South African Produ ction Expenditure
(QSAPE) should be at least R12 million for level one (1) Broad
Based Black Economic Empowerment (B-BBEE) contributor
status service companies for shooting on location in South
Africa.
3.3.3 The Qualifying South African Post Production
Expenditure (QSAPE) should be at least R1.5 million for
conducting post-production activities in South Africa.
3.4 The Foreign Film and Television Production and Post -
Production Incentive provides an incentive of twenty -five percent (25)
of the Qualifying South African Production Expenditure (QSAPE).
3.4.1 An additional incentive of five percent (5%) of QSAPE is
provided for productions conducting post -production in South Africa
and utilising the services of a black owned service company.”
[98] In contending that the Incentive is not in support of the B -BBEE, as its (the
B=BBEE) objectives are not the primary objectives of the scheme, the Applicants
emphasise the provisions of paragraph 3.2, of the Guidelines, namely, to attract
large budget for eign-based films productions and post -productions that would
contribute to employment creation.
[99] Counsel for the Respondents contended that it is not a requirement that B -
BBEE would need to be the primary driver/objective of the Incentive for it (the
Incentive) to be the one ‘in support of’ , the objectives of the scheme, as argued by
the Appellants. According to this contention, on a wider interpretation, section 10
(1)(e) covers any incentive that is at least designed to be a significant contributor to
the B-BBEE objectives, even if those be purely secondary to other goals, such as in
the present matter.
[100] The crisp question is whether the Incentive is one ‘in support of’ B -BBEE as
required by section 10( 1) (e) of the Act. In assessing the competing contentions, I
think that i t is necessary to recap the principles of interpretation. In Natal Joint
Municipality Pension Fund v Endumeni Municipality 2012 (4) SA 593 at para 18, the
Court restated the modern approach to interpretation thus:
“[18] The present state of the law can be expressed as follows.
Interpretation is the process of attributing meaning to the words used in a
document, or contract, having regard to the context provided by reading the
particular provision or prov isions in the light of the document as a whole and
the circumstances attendant upon its coming to into existence. Whatever the
nature of the document, consideration must be given to the language used in
the light of the ordinary rules of grammar and syntax ; the context in which the
provision appears; the apparent purpose to which it is directed and the
material known to those responsible for its production. Where more than one
meaning is possible each possibility must be weighed in the light of all these
factors. The process is objective not subjective. A sensible meaning is to be
preferred to one that leads to insensible or unbusinesslike results or
undermines the apparent purpose of the document. Judges must be alert to,
and guard against the temptation to substitute what they regard as
reasonable, sensible or businesslike for the words actually used. To do so
would in regard to a statute or statutory instrument is to cross the divide
between interpretation and legislation. In a contractual context it is to make a
contract for the parties other than the one they in fact made. The inevitable
point of departure is the language of the provision itself , read in context and
having regard to the purpose for the provision and the back ground to the
preparation and production of the document.”
preparation and production of the document.”
[101] In order to interpret the Guidelines and section 10( 1) (e) of the B-BBEE Act, it
is necessary to remind oneself of the objectives of the B -BBEE Act as set out in
section 2. It is apparent fro m certain clauses of the Guidelines that although it has
not been expressly stated that the B -BBEE is primary objective of the Incentive
scheme, they seem to support B -BBEE objectives. In fact, it is clear from their
provisions that they actively pursue noteworthy B -BBEE goals. The following bear
testimony to this:
101.1 Clause 3.3.2 – the qualifying QSAPE (Qualifying SA Production
Expenditure) for eligibility to the Incentive is R12 million fo r BBBEE level 1
contributor level status service companies shooting on location in SA, which
appears to be lower than the qualifying QSAPE for those shooting in SA
locations and that are not at that contributor level (in 3.3.1).
101.2 Clause 9.1.2 provides for an additional 5% incentive of QSAPE for
productions conducting post -production in SA and utilising the services of a
black-owned service company.
101.3 Clause 4.8 regarding QSAPE, requires that the applicant must procure
a minimum f 20% of qua lifying goods and services from entities that are 51%
black-owned by SA citizens and have been operating for at least one year.
104.4 Clause 4.9.1 states that the service company can apply for additional
projects during the year, provided that it procures with regard to QSAPE at
least 30% of goods and services from entities which are 51% black -owned by
SA citizens and have been operating for t least one year.
101.5 Clause 5.1.1.2 requires the holding company to achieve at least Level
3 BBEEE contributor status in terms of the Codes of Good Practice.
101.6 Clause 5.1.1.3 provides that the SPCV must achieve a level 4 BBEEE
contributor status.
[102] The Clauses alluded outlined above, in my view, show that there is
considerable support for the B -BBEE from the Incentive. This stance is bolstered by
the uncontroverted evidence in paragraph 152 of the Department’s answering
affidavit deposed by Mr Kgomo to the following effect:
“[152] I have referred above to the 2016/2017 Annual Incentive Performance
Report (page 9) prepared by DTIC Incentive Development and Administrative
Division (IDAD), which recorded that:
“the dti promotes transformation through compliance with the Broad -
Based Economic Empowerment (BBEEE Act, 2003 (Act 53 of 2003 as
Based Economic Empowerment (BBEEE Act, 2003 (Act 53 of 2003 as
amended by Act 46 of 2013.”
[103] What can be discerned from the above statement is that the Incentive
programme forms part of the Department’s endeavours to promote transformation
through the B-BBEE Act, albeit not as a primary objective. In my judgment, whereas
the B-BBEE Act contains provisions that actively pursue its objectives, factually the
Foreign Film Guidelines likewise contains clauses which facilitate B -BBEE. In my
view therefore, an interpretation to the effect that Incentive is one ‘in support of ’ the
B-BBEE is sensible and ought to be preferred.
[104] Notwithstanding this finding, the Applicants i n further contending that Foreign
Film Incentive is not a scheme that was established ‘in support of’ broad-based black
economic empowerment, and that it was established for a different purpose as
defined in the Guidelines, placed much reliance on Afriforum NPC v M inister of
Tourism and Others; Solidarity Trade Union v Minister of Small Business
Development and Others 2022 (1) SA 359 (SCA) ; [2022] 1 All SA 1 (SCA) . Plasket
JA, explained that “the purposes of the DMA on the one hand and the B -BBEE Act,
on the other, are very different and that each statute is directed at achieving different
goals; the DMA is aimed at preventing or limiting disasters, mitigating their impact,
and enabling post -disaster recovery, while B -BBEE Act is aimed at promoting black
economic empowerment in order to enable black people to participate meaningfully
in the economy”. More specifically, the learned judge at para [46] held that since the
“DMA’s empowering provisions for the making of the regulations and directions make
no mention of B-BBEE objectives”, it followed that “the only way in which they could
be imported into the Minister’s empowerment would be is she was correct that s
10(1)(e) o f the B -BBEE Act required her to include them in her direction." The
learned judge further pointed out that absent this, their inclusion “appears to amount
learned judge further pointed out that absent this, their inclusion “appears to amount
to the pursuit of an improper purpose – one not authorised by the empowering
provision – no matter how laudable her intentions.”
[105] The Court, then discussed the “scope” of section 10(1)(e) and explained thus:
“The section requires organs of state and public entities to apply [the relevant
Code] when they determine criteria for awarding incentives, grants,
investment schemes in support of B -BBEE. The question to be answered is
thus whether the amounts paid from the fund are grants in support of B -
BBEE.”
[106] In light of the aforegoing, the Applicants submit that there is no explicit or
implicit reference in the Guidelines to the incentive scheme being one ‘in support of
broad-based black economic empowerment as contemplated in section 10(1)(e ).
According to the Applicants, this is much clearer when regard is had to the fact that
the Department has another Incentive – the Black Emerging Filmmakers Incentive –
where empowerment is its purpose as it declares thus:
“The objectives of the South African Emerging Black Filmmakers Incentive is
a sub -programme of the South African Film and Television Production and
Co-Production Incentive, is to nurture and capacitate emerging black
filmmakers to take up productions and contribute towards employment
opportunities.”
The B -BBEE Codes, according to this point explicitly apply to the Black Emerging
Filmmakers Incentive and not to the Foreign Film Incentive.
[107] It must be stated, and as correctly pointed out by Counsel for the
Respondents, that the Afriforum case is distinguishable from the facts of the present
matter as it dealt with the Disaster Management Act 57 of 2002 which did not include
pursuit of B -BBEE objectives at all and was focused purely on Disaster Relief. It is
also noteworthy that the Court in Afriforum pointed out that the empowering
provisions under which the Minister issued her directions makes no mention of B -
BBEE objectives, nor do her subsidy directions, whereas in casu, the Guidelines do
contain B -BBEE supporting provisions. In Afriforum in answering the question
whether the amounts paid from the Fund were grants in support of B -BBEE, the
Court said that:
“[49] The Minister, in her directions, made no such claim. Instead, she made
it clear that the grants were intended to mitigate the impact of Covid -19 on the
qualifying businesses. And, in her answering affidavit, she said that they were
qualifying businesses. And, in her answering affidavit, she said that they were
meant to alleviate , contain and minimise the eff ects of the economic fallout
wrought by the pandemic and the consequent state of disaster. The words
she chose resonate with section 27 (2) of the DMA and regulation 10(8)(c ) –
the empowering provisions in terms of the DMA for the Minister of Co -
operative Governance and Traditional Affairs to make regulations and the
applicable empowering provisions that authorised the Minister to issue her
direction. In my view, the grants contemplated for the purpose are
consequently not grants in support of B -BBEE as co ntemplated by section
10(1)(e) of the B-BBEE Act but grants to further the purposes of the DMA.”
[49] When a person exercising public power has committed themselves
unequivocally to a basis for their authority to exercise that power, they stand
or fall by that choice. They are, generally speaking, not free to rely on some
other source of empowerment which may enable them to do what they
purported to do. “
[108] Based on the aforegoing reasoning employed by the Court, t he answer in the
present case, therefore, lies not on the Afriforum dictum.
[109] It will be recalled that section 10(1) of the B -BBEE Act requires that the
“…organ of state and public entity must apply any relevant code of good practice
issued in terms of this Act…” The Applicants contend that the Code does not apply
to the Scheme for the reason that a Code of Good Practice is binding only if it is – in
the words of section 10(1) – a “relevant code of good practice issued in terms of thee
Act.
[110] Code Series 000 Statement 000 specifies entities to which the Code applies.
It provides as follows:
“3. APPLICATION OF THE CODES
3.1 The following entities are measurable under the Codes:
3.1.1 all Organs of State and Public Entities;
3.1.2 all Measured Entities that undertake any economic activity with all
Organs of State and Public Entities;
3.1.3 any other Measured Entity that undertakes any economic activity,
whether direct or indirect, with any other Measure Entity that is subject to
measurement under paragraph 3.1.1 to 3.1.2 and which is seeking to
establish its own B-BBEE compliance.
[111] Accordingly, so contend the Applicants the Code is only of application, and
therefore a “relevant” Code, if the applicant is an entity that “undertake(s) economic
activity with an organ of state or a public entity ”. It is further argued that the
Applicants do not undertake any “ economic activity ” with the Department when
applying for a Foreign Film Incentive. The result thereof is that Code 000 is therefore
not a “relevant” Code and binding under the B -BBEE Act. Thus, as a matter of law,
the BEE Act and Codes of Good Practice have no application to an application for an
incentive. In other words, Incentive does not constitute undertaking of an economic
activity with the DTI.
[112] The issue turns on whether the application to the Department for the Incentive
constitutes undertaking of any economic activity with the Department. In order to
determine the meaning of the phrase “any economic activity” , in the context of the
present proceedings, I think it is necessary to first outline its ordinary dictionary
meaning. The Concise Oxford Dictionary 10th ed, (2001) defines the adjective
‘economic’:
1. of or relating to economics or the economy;
2. justified in terms of profitability.
It defines “activity” thus:
1. a condition in which things are happening or being done.
2. an action taken in pursuit in pursuit of an objective.
[113] In Standard Bank Investment Corporation v The Competition Commission and
Others; Liberty Life Association of Africa Ltd v Competition Commission and Others
2000(2) SA 797 (SCA) at para 9, the Court said the following about the meaning of
“economic activity”, which appears in the following phrase of the Competition Act
(“This Act applies to all economic activity within, or having an effect within, the
Republic…)
“These words of great generality extend its operation to the countless forms of
activity which people undertake in order to earn a living.”
[114] As discernible from the aforegoing, it is clear that the matter turns on the
interpretation of the phrase “economic activity”. Counsel for the Respondents
referred to an interpretation of economic activity in the context of VAT proffered by
the Constitutional Court in Road Traffic Management Corporation v Tasima (Pty) Ltd
and a related matter [2020] JOL 48028 (CC) (quoting from Institute of Chartered
Accountants in England and Wales v Customs and Excise Commissioners [1997]
STC 115 5 (CA) (“Institute of Chartered Accountants”) at 1166c thus:
“From these cases I conclude that the concept of an economic activity is an
activity which typically is performed for a consideration and is connected with
economic life in some way or a nother. But it is not an essential characteristic
that it should be carried on with a view to profit or for commercial reasons but
must an activity which is analogous to activities so carried on. An activity
which consists in the performance of a public se rvice to which the idea of
commercial exploitation with a view to profit or gain is alien is not of an
economic nature particularly where the activity is one typically of a public
authority.
Applying these criteria to the activities of the institute I find that they are not
activities of an economic nature. They are activities which Parliament has
decreed should be carried out for the protection of the public and are
regarded as the exercise of public control over those who engage in financial
services, aud iting and insolvency practice. The fact that the institute
generates revenue from the issue of licences, certificated or maintenance of
the register to cover overheads does not of itself mean that it is an economic
activity. In carrying out this activity the institute is performing public services to
activity. In carrying out this activity the institute is performing public services to
which the very idea of exploitation with a view to profit is alien. Further they
are typical of the activity of a public authority. Though connected with the
activity of the profession of accountancy, the activ ity of the institute does not
consist in supply of such services for consideration but in ensuring that those
in the profession who provide such services do so in accordance with the
law’s requirements.”
[115] Counsel for the Respondent argued that within the key phrase “undertake any
economic activity with ”, the words “any economic activity ” could be of quite varying
expansiveness depending heavily on the surrounding context. For example, so
continued the conte ntion, the wider meaning would extend to comprising any
transaction that forms part of the economy. Such an extension would include
transactions forming part o f the administration of the wealth and resources of a
community/State. Put in another way, the subsidy/incentive transaction would be part
of the distributive aspect of the production, distribution, and consumption of goods
and services within the economy. Accordingly, so concludes the argument,
undertaking an economic activity with a state organ migh t include the undertaking of
a subsidy/incentive transaction with them.
[116] The phrase “economic activity” must also be assessed in the context in which
it has been used in the Code. Clause 7.6 states that:
“Despite paragraph 7.4, a Start -up Enterprise m ust submit a QSE scorecard
when tendering for any contract or seeking any other economic activity
covered by Section 10 of the Act, with a value of higher than R10 million or
more they should submit the Generic scorecard. The preparation of such
scorecards must use annualised data.”
[117] The Applicants contend that clause 7.6 is only referring to section 10(1)(a) of
the B -BBEE Act because this is the only sub -paragraph of section 10 expressly
mentioning “economic activities”.
[118] The phrase “economic activit y” appears several times in the B -BBEE Act,
including in the objectives, where it expresses the objectives that various
disadvantaged communities may increase “their access to economic activities,
infrastructure and skills training”. This immediately suggests that the phrase is used
in a wider sense . To my mind, “economic activity” is wide enough to include an
Incentive. In the context of the present case, an incentiv e is also an activity
Incentive. In the context of the present case, an incentiv e is also an activity
undertaken to achieve economic ideal, be it in the form of production or distribution
and consumption of goods or services within the economy. It cannot be limited to
conducting some form of business with the State only. In essence, it, in its generality,
in my view extends to comprising any transaction relating to the distributive aspect of
the production, distribution, and consumption of goods and services within the
economy.
[119] In Oceana Group Ltd & another v Minister of Water and Environmental Affairs
& others, [2012] 2 All SA 602 SCA the Supreme Court of Appeal considered the
applicability of provisions of Code (“namely: “ any enterprise that undertakes
business with any organ of state or public entity”) which was interpreted by the court
a quo (Cleaver J) to include such a regulatory transaction between a state organ
and an entity to allocate fishing rights, and held thus:
“[31] The codes were published by the Minister of Trade and Industry in the
Government Gazette on 9 February 2007, after the long -term rights allocation
process, but before the adoption of the TP. In terms of s 10(a) of the BBBEE
Act, the provisions of which appear i n paragraph 14 above, every state and
public entity is obliged to take into account as far as reasonably possible “any
relevant code of good practice” issued in terms of that Act. The immediate
question that arises is whether a relevant code of good practi ce exists which
the minister and her department are obliged to apply.
[32] It is clear from a reading of paragraph 3 of the Codes that what was
intended by paragraphs 3.1.2 to 3.1.4 is that specified public entities and
enterprises that “undertake business” with, inter alia, any organ of state or
public entity should be measurable entities to which the codes apply. It is
understandable that government would be intent on ensuring that those to
with whom it engaged in commercial activity would government transformative
objectives. The reward for complying with government’s transformation
targets would be eligibility for government contracts. Paragraph 3.1.2 applies
to public entities. When they “undertake any business” with any other
to public entities. When they “undertake any business” with any other
“enterprise in accordance with paragraph 3.1.2, it must be taken to mean
commercial interaction between the two entities. Where the same or
essentially similar words or phrases or expressions are used in various places
throughout a legislative instrument, they are presumed to bear the same
meaning throughout. In my view, a purposive interpretation leads ineluctably
to the conclusion that the entities con sidered measurable in terms of
paragraphs 3.1.3 to 3.1.4 are enterprises that engage in commercial activity
with, inter alia, any organ of state or public entity.”
[120] Counsel for the Respondents stated that soon after this decision ( Oceana) in
2012, and in around 2013, the Code was revised to put in place the new phrasing at
issue in the present case. More specifically, the prior phrase “undertakes any
business with” was replaced with the wider phrase “economic activity”. According to
this contention, this is an indicator of an intent to drive a wider interpretation of the
type that the Respondents sought to pursue in this case.
[121] In my judgment, an interpretation of ‘‘economic activity” that excludes an
application for an incentive or subsidy is unjustifiably restrictive as the Applicants by
applying for an incentive undertake an economic activity. I do not think that th e
meaning of “economic activity” should be rigidified. The economic activity associated
with the Incentive, in my view falls squarely within the economic activity with a state
organ. This much is clear from the objectives set out in the guidelines.
The Scorecard requirement
[122] The Applicants further contend that even if it is found that the Codes apply to
the Incentive, the Department erred in deciding that HPL had to use a QSE
scorecard. Instead, the Applicants were still permitted to make use of sworn affidavit.
[123] First, it is undisputed that HPL is a Start -up Enterprise. Schedule 1 of the
Codes of Good Practice defines a start-up enterprise as follows:
“a recently formed or incorporated Entity that has been in operation for less
than 1 year. A start -up enterprise does not include any newly constituted
enterprise which merely is continuation of a pre-existing enterprise.”
[124] In paragraph 4 of the relevant Code Series 000, Statement 000 the qualifying
status of Start -up Enterprises on the same basis as the Exempt Micro Enterprises
status of Start -up Enterprises on the same basis as the Exempt Micro Enterprises
(“EMEs”) is set out in the following manner.
“10.1 Paragraph 4.2 provides that “ Start-Up Enterprises are ordinarily
regarded as Exempted Micro En terprises, unless tendering for a contract in
excess of the threshold for EMEs, in which case the corresponding scorecard
will apply.”
10.2 In terms of paragraph 4.1, the thres hold for EMEs is an annual Total
Revenue of R10 million or less.
10.3 Paragraph 4.4.2 stated … “am EME is at least 51% Black Owned,
measured using the flow-through principle, qualifies for elevation to ‘Level
Two Contributor’ having a B-BBEE recognition level of 125%.”
10.4 Paragraph 4.5 permits but does not require EMEs to measure
empowerment using a QSE scorecard “should it so choose”.
10.5 Paragraph 4.6 states that an EME “is only required to obtain a sworn
affidavit or Certificate issued by the Companies and Intellectual Property
Commission” confirming its revenue and levels of Black ownership.”
[125] Against this backdrop, the Applicant s contend that HPL, being a Start -up
Enterprise which had applied for an incentive and not “tendered for a contract ” is
permitted to provide a sworn statement confirming its revenue and Black ownership.
Even if that may not be the case, paragraph 5 of the Statement which deals with
“Qualified Small Enterprises (“QSEs”) based on the provisions of paragraph 5 of the
Statement states that:
“11.1 Measured Entity with an annual Total Revenue of between R10 million
and R50 million qualifies as a Qualifying Small Enterprise.” (Paragraph 5.1)
11.2 Paragraph 5.3.2 provides that “ a Qualifying Small Enterprise which is
at least 51% Black Owned, measured using the flow -through principle,
qualifies for elevation to a B -BBEE Level Two Contributor’ having a B -BBEE
recognition level of 125%”.
11.3 Paragraph 5.3.3 states that “a Black Owned QSE in terms of paragraph
5.3 above, is only required to obtain a sworn affidavit” confirming its revenue
and level of Black ownership.
11.4 Paragraph 5.4 permits but does not require a black -owned QSE to
11.4 Paragraph 5.4 permits but does not require a black -owned QSE to
measure empowerment in terms of the scorecard “should it so choose”.
[126] Applying these provisions to HPL, the Applicants argue that HPL is a QSE.
This is so because it is applying for an incentive that exceeds R10 million. Once it
receives it, its annual Total Revenue will exceed R10 million but be less R50 million.
In addition, HPL is a 51% Black Owned QSE. Thus, in terms of paragraph 5.3.3 HPL
is required to provide a sworn statement and is not required to use the scorecard.
[127] The Applicants further argue that notwithstanding the arguments already
advanced, there is yet another basis upon which the Department erred in its decision
to the effect that HPL was required to produce a scorecard. This is based on the
provisions 7 of the Statement which deals with “Eligibility of Joint Ventures and Start-
Up Enterprises ”. Paragraph 7.4 provides that Start -up Enterprises are deemed to
have qualifying B -BBEE Status in accordance with the principles of paragraph 4 of
the Statement.” The Applicants reiterate that paragraph 7.5 does not require QSEs
to measure empowerment using a scorecard. However, Paragraph 7.6 of the
Statement provides as follows:
“Despite paragraph 7.4, a Start -up Enterprise must submit a QSE
scorecard when tendering for any contract, or seeking any other
economic activity covered by section 10 of the Act, with a value higher
than R10 million but less than R50 million. …”
[128] To recap, to this end, the Department in its answerin g affidavit state s the
following:
“In terms of the B -BBEE Act, a Start -up Enterprise must submit a Qualifying
Small Enterprise (“QSE”) scorecard when tendering for any contract, or
seeking any other economic activity covered in terms of Section 10 (1) of the
B-BBEE Act, which have a value higher than R10 million but less than R50
million …”
“Qualifying Small Enterprise (“QSE”) scorecard when tendering for any
contract, or seeking any other economic activity covered in terms of Section
10 (1) of the B-BBEE Act, which have a value higher than R10 million but less
than R50 Million …”, this affects SPCV’s which are classified as a start -up
applying for incentives greater than R10 million …”
[129] The BEE Commission made a similar statement to the following effect:
“… a start-up enterprise must submit a B -BBEE certificate issued against the
QSE scorecard when tendering for any contract, or seeking any other
economic activity covered in terms of Section 10 (1) of the B -BBEE Act which
have a [value] of between R10 million and R50 million.”
[130] With this background in mind, the Applicants, contend that it was not “seeking
any other economic activity covered in Section 10 (1) of the BEE Ac t. But I have
already found that seeking an incentive constitutes “economic activity”.
[131] Finally, the Applicants insist that the interpretation of the Codes of Good
Practise, more particularly paragraph 5.1.1.4 makes it clear that HPL was permitted
to provide an affidavit. It states: “The SPCV and holding company must submit a
valid B-BBEE certificate of compliance issued by an accredited agency or an affidavit
at application stage.”
[132] The above then turns to the interpretation of clause 5.1.14. It states that: “The
SPCV and the holding company must submit a valid B -BBEE certificate of
compliance issued by an accredited verification agency or an affidavit at application
stage.” The provisions are clear, and I see no need to resort to extensive tools of
interpretation as the wording itself is plain that HPL was at application stage entitled
to submit an affidavit. Nonetheless, Counsel for the Respondents contend that the
Clause should not be read in isolation, for its proper context , it ought to be read
together with clause 5.1.1.1 which requires that the SPCV and holding company
must be in compliance with the B -BBEE Codes. In my view this contention is vague
and unmeritorious. The following common cause facts support the interpretation that
a newly formed entity may at application stage make use of an affidavit as, because
a newly formed entity may at application stage make use of an affidavit as, because
of its newness, it may be impossible to measure certain elements of the scorecard:
132.1 Paragraph 4.2 of the Guidelines require an applicant to register a
SPCV “solely dedicated for the production and/or post -production activities of
the film” which “ must be utilised for (1) production and/or postproduction”.
Accordingly, the Guidelines require either the incorporation of an entirely new
entity or the use of a dormant entity that has no previous trading history. It is
undisputed that HPL is a freshly incorporated entity.
132.2 A freshly incorporated or previously dormant SPCV can only be
measured in respect of ownership. It cannot be measured in respect of the
four other elements – management control, skills development, enterprise and
supplier development , and socio -economic development. This is because a
freshly incorporated entity has no trading history in respect of those elements
on which it could be assessed.
132.3 It is undisputed that t o acquire a level four (4) B -BBEE contributor
status using a QSE scorecard, an entity requires at least 65 points . In the
case of a new SPCV, the only effective element that can be measured is
ownership, which accounts for only 25%. Accordingly, a new SPCV can only
realistically acquire a maximum of 25% points. Thus, it is virtually impossible
for a SPCV required by the guidelines to achieve level four (4) contributor
status.
132.4 The Respondents’ suggestion that the other elements of the scorecard
can be measured using “annualised data” does not hold water because they
do not explain how a company with no trading history can ever have data
which can be “annualised”.
[133] The Applicants contend , without a murmur from the Respondents , that in the
past the Department has in the past avoided this dilemma by accepting sworn
statements. It follows from the aforegoing that the most sensible way to interpret the
Guideline requirements is that the use of a sworn statement is permissible at
application stage. Therefore, in my judgment, the intention manifest in the Guidelines
application stage. Therefore, in my judgment, the intention manifest in the Guidelines
is to permit use of sworn statement at application stage and does not require the use
of scorecard . I find that HPL ought to have been permitted to produce a sworn
statement at the stage when it launched the application. The finding is fortified by
the Interpretation Note issued by the Respondents permitting use of a sworn
statement at application stage.
[134] The Re spondents suggest that the Interpretation Note cannot aid in the
interpretation of the Guidelines as it was issued after the present application was
launched and its effect is not retrospectiv e. The Applicants in retort state that the
Department misunderstands the nature of interpretation because when one
interprets a document, one is not amending it, but is merely ascertaining its objective
meaning, and the meaning does not change from one day to the next. Accordingly,
as a matter of objective interpretat ion, the Guidelines, much the same as in the
interpretation of statues by the courts, have the same meaning since inception in
2018. By way of analogy, Counsel for the Applicants referred the court to a judgment
of the House of Lords in National Westminister Bank pic v Spectrum Plus Limited
[2005] 2 AC 680 (HL) at para 6-7 where the following was said:
“… [F] from time to time decisions on points of law represent a change in what
until the law in question was thought generally to be . This happens most
obviously when a court departs from, or an appellate court overrules , a
previous decision on the same point of law. The point of law may concern the
interpretation of a statute or it may relate to the principles of ‘judge -made’ law,
that is, the common law (which for this purpose includes equity). A change of
this nature does not always involve departing from or overruling a previous
court decision. Sometimes a court may give a statute, until then free from
judicial interpretation, a different meaning from that commonly held.
… A court ruling which changes the law from what it was previously thought to
be opera tes retrospectively as well as prospectively. The r uling will have a
retrospective effect so far as the parties to the particular dispute are
concerned…”
[135] It indeed is so that in a myriad of cases our courts have limited the
retrospective effect of legislative provisions to avoid uncertainty. I agree with
retrospective effect of legislative provisions to avoid uncertainty. I agree with
Counsel for the Applicants that the Interpretation Note elucidates the proper meaning
of the Guidelines as they always have been and does not purport to amend them. In
this judgment I have not found it necessary to resort to the aid of Interpretation Note
as the Guidelines themselves are very clear in setting out that a QSE scorecard is
not necessary but an affidavit will suffice at application stage.
[136] I do not deem it expedient to deal in detail with the Applicants’ challenge on
the rationality of the Guidelines on th e scorecard issue . It is obvious from the
interpretation of the Guidelines I have proffered above that any other interpretation
requiring use of a scorecard for the Applicants at application stage would be
irrational and therefore unconstitutional.
[137] It remains to be said that the Applicants raised a further point, namely, that
the Respondents acted on the dictates of the BEE Commission in adopting the
stance that a scorecard was necessary. This is not disputed by t he Respondents.
More specifically, Mr Kgomo does not deny that he informed Mr Sikwebu and Ms de
Mardt in a telephone call that the Department “stopped processing all applications for
incentives in excess of R10 million as they believe themselves bound by t he views
expressed by the BEE Commission”. Paraphrased, the decision of the Department to
the effect that a scorecard was necessary was informed by the views expressed by
another entity , the BEE Commission. As evident from the interpretation of the
Guidelines in this judgment, the interpretation proffered by the Commission was
obviously erroneous. The Department therefore acted unlawful in taking the view that
it was bound by the Commission’s erroneous interpretation of the Guidelines.
Support for th is finding is found in Genesis Medical Aid v Registrar of Medical
Schemes 2017 (6) SA 1 (CC) at para 20-22 thus:
“[20] Genesis’s review of the Registrar’s decision was based on the
assertion that , since Omnihealth was incorrectly decided, the rejection of
Genesis‘s financial statements was materially influenced by an error of law.
This review ground traditionally finds application where an administrator
wrongly misconstrues or misinterprets a legislative provision. The second
judgment suggests:
‘It follows that the error of law relied on by Genesis must arise from the
misinterpretation or misapplication of the MSA provisions by the
misinterpretation or misapplication of the MSA provisions by the
Registrar which relate to the submission of annual financial
statements.’
This seems an inappropriate rigid characterisation of both the ground of
review and of what happened between the parties here. Constitutional
precepts caution against adopting so rigid an approach. By explicitly affording
the right to just administrative a ction, the Constitution bestows on courts the
power to review every error of law, provided of course it is “material”. PAJA
embodies this right, in explicit terms. There is nothing in the statute that
narrows or stifles it.”
The Registrar’ decision to reject Genesis’s financial statements was not
merely influenced by Omnihealth. That decision was what caused, created
and drove the rejection. Omnihealth was effectively the be -all and end -all of
the Registrar’ s decision. Without Omnihealth, the Registrar wou ld not have
taken it. The parties would never have been at odds. In lawyer’s language
Omnihealth was “material” to the disputed decision. And if Omnihealth was
wrong, that means the Registrar’s decision was wrong then – and that is
wrong now.”
[138] So too in the present matter, because the BEE Commission interpretation of
the Guidelines is wrong, so is the Department’ decision.
The Constitutional challenge
[139] The Applicants have raised several constitutional issues on the basis of
which they alle ge the decisions of the Department are vitiated by irrationality ,
arbitrariness and are therefore unconstitutional.
Arbitrary not to treat like cases alike
[140] Counsel for the Applicants contended that it had been an accepted way for
applicants to submit sworn statements when lodging an application for a film
incentive. Of note is that the Respondents do not deny that for film incentive
applications made before HPL and Indy’s application, the Department accepted a
sworn statement in lieu of the QSE scorecard and paid out the incentive. And for the
film incentives made after HPL and Indy’s application, the Department confirmed in
its affidavit that it will accept a sworn statement. Yet, the Applicants’ application was
rejected because the QSE scorecard was not used to assess it. It is therefore clear
that HPL and Indy have been treated differently. Put in another way, the Department
arbitrarily failed to treat like cases alike.
[141] In Pharmaceuticals Manufacturers Association of South Africa and Another:
In Ex Parte President of the Republic of South Africa and Others 2002 (2) SA 674
(CC) para 85 the Court said the following:
“[85] It is a requirement of the rule of law that the exercise of public power
by the Executive and other functi onaries should not be arbitrary. Decisions
must be rationally related to the purpose for which the power was given,
otherwise they are in effect arbitrary and inconsistent with this requirement. It
follows that in order to pass constitutional scrutiny the exercise of public
power by the Executive and other functionaries must, at least comply with
this requirement. If it does not, it falls short of the standards demanded by the
Constitution for such action.”
[142] The Respondents’ arbitrary failure to treat HPL and Indy the same as other
applicants transgresses t he constitutional principle of equality. No reasons have
been advanced for the different treatment. The Department’s decision therefore
violated this elementary requirement of the rule of law.
Unlawful frustration of the applicants’ expectation
[143] Counsel for the Applicants raised yet another ground of a constitutional
violation by the Respondents, namely, that flowing from the manner in which other
applicants had been treated by the Department in accepting a sworn affidavit in lieu
of a scorecard, the Applicants’ legitimate expectation had been violated. In Premier,
Province of Mpumalanga and Another v Executive Committee of the Association of
Governing Bodies of State Aided Schools: Eastern Transvaal 1999 (2) SA 91 (CC,
the Court (O’Regan J) confirmed that a party has the protection of procedural
fairness where organs of state breach a legitimate expectation that the party had ,
based on the existence of a regular practice which it could be r easonably expected
based on the existence of a regular practice which it could be r easonably expected
to continue and para 36 held thus:
“Citizens are entitled to expect that government policy will ordinarily not be
altered in way which would threaten or harm their rights to legitimate
expectations without being given reasonable notice o f the proposed change
or an opportunity to make representations to the decision-maker.”
[144] It has been firmly established in our law that for a practice to constitute a
legitimate expectation there are four requirements: (a) a reasonable expectation (b)
that was induced by the decision -maker (c) based on a clear, unambiguous
representation (d) which it was competent and lawful for the decision -maker to
make. (Premier Mpumalanga at para 21). The representation in (c) can “arise from
an express promise or a regular practice” (Walele v City of Cape Town and Others
2008 (6) (CC) at para 42). Whether a departmental practice constitutes a legitimate
expectation depends on “whether what happened was an isolated event or a
procedure designed to lay a basis for pl anning future conduct and arrangements” .
(MEC for Education, Northern Cape v Bateleur Books (Pty) Ltd 2009 (4) SA 639
(SCA) at para 18. At para 20, the Court held that a practice of decentralised
procurement of text books in place for at least two years met that hurdle because it
was a “fairly settled way of doing things.”
[145] I have already indicated t hat in the answering affidavit, the Respondents do
not deny that before 30 May 2022, the Applicants and the entire film industry
understood that submitting a sworn statement to demonstrate the Level 4 contributor
status of the SPCV complied with the requir ements of the Guidelines, including
where the rebate applied for exceeded R10 million. The Applicants submit that on
this basis, the HPL and Indy had a legitimate expectation that applications in future
would be assessed on the same basis. Furthermore, acting on this expectation, they
compiled their application in accordance with the requirements of the Guidelines as
compiled their application in accordance with the requirements of the Guidelines as
they had previously understood them and applied by the Department in accepting
applications for the foreign film incentive.
[147] The Applican ts allege in their papers that only on 30 May 2022 were they
informed of the Department’s change of view, viz, that the QSE scorecard was
required, less than a month before the principal photography was set to begin, and
at a stage where it was impossible for them to satisfy the new view expressed by the
Department. Moreover, the Department in failing to the Applicants any notice of its
changed view concerning the requirements or an opportunity to make
representations concerning the change before it was ado pted and applied in their
case unlawfully frustrated the Applicants’ legitimate expectations and acted unfairly.
[148] It is my judgment that flowing from the aforegoing, the Department’s decision
is vitiated by arbitrariness and an unlawful frustration of a legitimate expectation and
is therefore liable to be reviewed and set aside.
Waiver of the commencement of principal photography
[149] The Applicants seek a review and setting aside of the Department’s refusal to
grant a waiver of the requirement in p aragraph 4.3 of the Guidelines, that principal
photography must not commence before it has provided an acceptance letter.
According to the Applicants, the Department not only has the power to grant the
waiver, it ought to have granted it. This is so becau se paragraph 13.8 of the
Guidelines grants the Department a discretion to relax any of the “minimum
requirements, conditions or terms in these guidelines”.
[150] It is not in dispute that the Department has previously granted waivers of this
nature. In the founding affidavit, the Applicants aver that in a telephone call with Ms
De Mardt, Mr Kgomo made this admission. Ms de Mardt states that: “He was
unequivocal that the Department would not provide a waiver to commence principal
photography on 28 June 2022. He said that whilst the Department had done so
previously, this would no longer happen. He gave no reasons for this change in
approach”.
[151] The Respondents readily and correctly acknowledge that the Department has
the power to relax the minimum requirements of the Guidelines. However, they
contend that any such relaxation will be based on merit, which strongly signals the
need to apply it on the individual meri ts and facts of the case. They further contend
need to apply it on the individual meri ts and facts of the case. They further contend
that Ms de Mardt’s request to waive the peremptory requirement not to commence
principal photography until after an approval letter is received, was made
subsequent to the final decision to refuse the incentiv e application. Accordingly, the
application had by this time been disposed of, and Mr Kgomo was then functus
officio and was not authorised to change his mind, and revoke, withdraw or revisit
the decision unless specifically authorised to do so. Furthermor e, the application
was no longer live and had the waiver been granted, Mr Kgomo would committed
the Department to a liability of some R12,5 million without regard to the
responsibilities of accounting officer in section 38 of the Public Finance
Management Act 1 of 1999 (PFMA), responsibilities of other officials in section 45 of
the PFMA, Regulations 8.2.1 of the Treasury Regulations.
[151] Retorting to these contentions, Counsel for the Applicants argued that
whether or not a request for waive was made before or after the final decision
(which the Respondents contend was made on 30 May 2022), there is no reason to
conclude that a waiver could not be granted retrospectively. In addition, the only
reason advanced by the Department when it refused the waiver was simply that it
“cannot” and “do[es] not” do so.
[152] To determine whether the Department should have granted waiver, the
following facts are relevant:
152.1 The Guidelines specify time -frames by when an application should be
made. It must be ma de “not earlier than forty -five (45) calendar days prior to
the commencement of principal photography. In terms of the Interpretation
Note Applicants are encouraged to apply for the incentive at least three
months prior to commencement of principal photography.
152.2 Indy and HPL made the application on 10 March 2022 – more than
three months before the principal photography was set to commence on 28
June 2022.
152.3 The Department only communicated its view that HPL required a
scorecard for the first time o n 30 May 2022 – that is eleven (11) weeks after
the application was made, and less than a month before principal
photography would commence.
152.4 In the founding affidavit, the Applicants by that time they had already
152.4 In the founding affidavit, the Applicants by that time they had already
taken all the steps necessary to ensu re that principal photography could start
at the intended date. This included contracting with actors and service
providers.
[153] It must be stated from the outset that the reasons for refusing the application
for waiver advanced in the answering affidavi t relating to Public Finance
Management and Treasury instructions are not the reasons initially furnished by the
Department. Thus, they constitute ex post facto justification. Therefore, the main
question for determination is whether the Department’s asser tion that it “cannot” or
“do[es] not” grant waivers is premised on a material misrepresentation of the
Guidelines as alleged by the Applicants. Linked to this question is the consideration
of whether, in terms of the Guidelines provision it was no longer o pen to the
Department after it had issued the decision to consider the application for waiver.
[154] The above issues should be considered in the proper context of the events
pertaining to the application as they unfolded. First, the Applicants aver that t hey
only needed to apply for the waiver after they had been advised of the outcome of
the application by the Department. It is undisputed that on 30 May 2022 the
Applicants learned for the first time that a scorecard was required and the
application would be rejected for failure to produce it. I have already found that the
requirement to produce a scorecard is irrational and arbitrary. It then follows that the
advice issued to the Applicants was misguided. The issue that then arises is
whether the decision emailed by Mr Kgomo on 30 May 2022 was a final decision
and the one issued on 24 June 2022 was an affirmation of the final decision. In my
view, it is clear from the language in the 30 May decision, to the effect that the
application “will be refused”, that it was not a final decision. Mr Kgomo’s explanation
to the effect that this must be attributed to the fact that English is not his first
language or semantics is unconvincing. This is so because it is inconsistent with his
language or semantics is unconvincing. This is so because it is inconsistent with his
obvious command of the languag e in other correspondence. In my judgment, it is
not simply a matter of “inelegance”, it conveyed a clear message that that was not
yet a final decision. This much is clear from the fact that a final decision was then
issued on 24 June 2022.
[155] Turning to the actual reason for the refusal, namely that the Department
“cannot” and “do[es] not” grant waivers, the undisputed facts establish that the
Department this statement is incorrect. It is inconsistent with the admitted facts. This
leads to the inevita ble conclusion that the decision is irrational as the facts
demonstrate that the Department in fact “can” and in fact “does” grant waivers.
[156] With regard to the functus officio defence raised by the Department, it is plain
that in light of the finding to the effect that the final decision to refuse the foreign
incentive application was made on 24 June 2022, the Department was between 20
May and 24 June 2022 not yet functus officio. The waiver application was made as
soon as the 30 May 2022 provisional decision relating to the use of the scorecard
was delivered. There therefore was a window period before the final decision within
which the waiver application could have been considered by the Department before
the final decision was issued on 24 June 2022. Furthermore, it is clear that it would
have been nigh impossible for the Applicants to make a new application or
challenge the decision and have a decision issued within the four days before the
commencement of the principal photography on 28 June 2022.
[157] Further regarding the functus officio reason proffered by the Department,
Counsel for the Applicants contended that there is no reason why the waiver could
not be granted retrospectively. According to the Applicants, as De Wille explains in
contrast to “an exercise of powers which affect rights and/or legitimate expectations,
it would in principle be objectionable for an exercise of which is purely be
retrospective in nature ”, waiving the principal photography requirement is “ purely
beneficial”. (De Wille Judicial Review of Administrative Action in South Africa [2003]
at 193).
[158] In my view, because of the flexibility of the Guidelines as r ecognised in
Mellow Shark Productions (Pty) Ltd v Minister of Trade and Industry and Others
(81785/2017) [2022], there is no reason why the waiver application could not be
(81785/2017) [2022], there is no reason why the waiver application could not be
considered granted between the period of the two decisions . This is particularly so
because the Applicants lodged their application three months before the anticipated
date of commencement of the principal photography and the delay in processing it
falls squarely on the shoulders of the Department. The following passages in Mellow
Shark Productions relating to the Guidelines relating to the Foreign Film Incentive,
resonate with my reasoning:
“[21] Programme Guidelines were set for applications under the Incentive.
The respondents made much of the fact of the Programme Guidelines. Their
approach was that those Guideline were cast in stone and could not be
deviated from. This view is gainsaid by the included in in the said document
which reads as follows:
‘The guidelines document provides the criteria to assess proposals from
potential film and television projects and the process of applying for the
incentive. The guidelines are approved and issued by the Minister of Trade
and Industry for the purpose of ensuring clarity on the aim and requirements
of the incentive programme the dti reserves the right to amend the guidelines
as it deems appropriate.
[22] …
[23] None of the terms defined above provide a ny support for something
being cast in stone. It was a mere guide to the application.”
[159] It must be accepted that after the Department had made its final decision on
waiver and to reject the film incentive application, it had effectively discharged its
function and therefore its autonomy had ceased. It had no authority to vary revoke
or vary the decisions. Thus, I make no finding with regard to the retrospectivity
theory. As I have already indicated, in the matter at hand, the Department’s delay in
issuing a decision after HPL and Indy had lodged the application timeously gave rise
to the situation where the waiver had to be sought at a late hour.
[160] In concluding this issue of waiver, I reaffirm that the Department had the
power to depart from its r equirements in appropriate circumstances as envisaged in
paragraph 13.8 of the Guidelines which grants it a discretion to relax any of “the
minimum requirements of these guidelines”. This would include, as contended by
Counsel for the Applicants the requir ement that principal photography commence
only after approval. However, the only reason for the decision provided by the
Department that it “cannot” and “do[es] not” grant waiver is contrary to the
Department that it “cannot” and “do[es] not” grant waiver is contrary to the
Guidelines I have already found are flexible and is incon sistent with the admitted
facts. Thus it must be reviewed and set aside.
Circumvention/Fronting allegations
[161] In light of the finding that it is apparent from the Guidelines that the
Department has accorded transformation prominence, thus the BEE Code s are
applicable to Foreign Film Incentive applications, I must consider the issue of
circumvention raised by the Department on the papers.
[162] To recap, the issue of fronting arose when Mr Kgomo who had previously
dealt with DO Productions in regard to its past applications for the film incentive
programmes, queried why the company having been involved in the Incentive
application could not trans form from within rather than effecting transformation
through Indy, a newly established and unknown entity. The context to this query is
that DO Productions is a well -known established white -owned company through
which Ms de Mardt, a shareholder launched t he Incentive application. It had a level
4 BEE status. It is undisputed that without improving its transformation score, DO
Productions would not meet the eligibility criteria set out in the guidelines. The same
shareholders and directors in DO Productions also hold shareholding and
directorship in Indy, together with newly introduced 52% Black shareholders and
directors, which then gives Indy level 1 BEE status. The nub of the Department’s
objection was that transformation was being effected through Indy instead of DO
Productions. Mr Kgomo indicated in the email of 30 May 2022 that the aim of the
aim of the Incentive was to drive existing beneficiaries (DO Productions) within the
industry to transform towards meaningful transformation.
[163] I have already held that the BEE Codes are applicant herein. That
immediately suggests that the Department correctly raised the issue of
transformation within the DO Productions. Had it not done so, it would have been
remiss. In Bato Star Fishing (Pty) Ltd v Minister of Environmental Affairs and
Tourism and Others 2004 (4) SA 490 (CC);2004 (7) BCLR 687 (CC), Ngcobo J (as
Tourism and Others 2004 (4) SA 490 (CC);2004 (7) BCLR 687 (CC), Ngcobo J (as
he then was), writing separately to emphasise the importance of transformation in
the fishing industry within the meaning of the Marine Living Resource s said the
following at para 104:
“[104] . . . The transformation can take place in various ways: by
allocating quotas to new companies controlled by historically disadvantaged
groups, by insisting on internal transformation of existing companies, by
insisting upon employment policies that b ring historically disadvantaged
groups into senior administrative positions, possibly by schemes designed to
build capacity in other fishing activities until the new entrants have the
financial and operational stability necessary for the deep -sea hake indu stry,
to mention some. Exactly how this is to be done is complex and difficult and
ultimately a matter of policy. What is essential as far as fishing rights are
concerned is that the policy should meet the requirement of section 2(j), that
is, it must in a meaningful way address the need to restructure the fishing
industry to address historical imbalances and to achieve equity within “all the
branches of the fishing industry”.
[164] Ms de Mardt fully explained the reasons why Indy, a new corporate entity was
formed rather than the restructuring of DO Productions. She said that DO
Productions has a trading history and a value in a linked to both her and Brigid Olen
and if it were to be transformed there would be a huge financial cost to the new
entrants. This is afformed by Mr Sikwebu in a letter wherein he states that where he
to acquire “26% stake of DO Productions” he would “have to acquire a loan and
attain a debt of million of rands” and this was undesirable.
[165] It is not in dispute that Indy is 52 % black-owned. The manner of restructuring
is as envisaged by Ngcobo J, when the learned that judge said that “The
transformation can take place in various ways: by allocating quotas to new
companies controlled by historically disadvantaged groups”.
[166] Much was made of the fact that the Department’s fronting or circumventing
were referred to the BEE Commission which remained silent and did not make any
were referred to the BEE Commission which remained silent and did not make any
finding with regard thereto. That said, Mr Sikwebu’ s letter to the Commission did not
set out th e entire history of the Applicants with DO Productions, but nothing much
turns on that as the Commission is a party to these proceedings and must therefore
have received the papers wherein the whole history of how the fronting or
circumventing allegations emanated. Yet the Commission elected not to participate
in these proceedings. More specifically, it has made no comment at all with regard
to the possibility of fronting on the part of Indy.
[167] It is well to record that in this matter no outright findin g of fronting was made
by the Department that Indy sought to circumvent the law. In the email of 24 June
2022, conveying the Department’s final decision, the latter simply deferred the
matter to the Commission. And as I have said, the Commission has not pr offered
any opposition to the application, and neither did it raise any issue with the
constitution of Indy in light of the DO Productions history.
[168] It remains to be said that Paragraph 13.1 of the Guidelines provides that:
“Any attempt to circumvent or actual circumvention of these guidelines, which, at the
sole discretion of the DTI may allow an applicant who would otherwise not have
qualified to qualify for this incentive will lead to the rejection of the application” .
Counsel for the Applicants co ntended, correctly in my view, that the Department’s
reliance on paragraph 13.1 of the Guidelines in the answering affidavit is misplaced
because this requires a finding of fact that there was either “an attempt to
circumvent” or “actual circumvention” of the Guidelines, not a mere suspicion. I
reiterate that no such finding was made by the Department. Besides, the
Department never invoked paragraph 13.1 to reject the Applicants’ application.
Additionally, it is noteworthy that the Department did not rely on paragraph 13.1 of
the Guidelines when it rejected the application.
[169] Finally, in light of the fact that the BEE Commission did not raise any
concern with structure of Indy and its compliance with the BEE Act, it must be
accepted that there truly wa s no issue to raise. After all, it is the primary function
empowered to investigate such issues by section 13F of the BEE Act. Accordingly, it
is difficult to find that the structure violated any law.
Substitution
is difficult to find that the structure violated any law.
Substitution
[170] The Applicants seek substitution rel ief in terms of section 8(1) (c ) (ii) (aa) of
PAJA and sections 38 and 172(b) of the Constitution on the following terms:
170.1 an order substituting the Department’s refusal to waive the requirement
of not commencing with principal photography before app roval, with a
decision waiving the requirement with retrospective effect from 29 June 2022
(when the principal photography commenced); and
170.2 an order substituting the Department’s decision to refuse the film
incentive application, with a decision accepting the application.
[171] The Respondents oppose substitution basis primarily on the basis that based
the Department’s budgetary considerations render it inappropriate for this court to
substitute the Department’s decision as set out in the answering affidavit.
[172] Before considering the parties’ competing contentions on this score, I think it
makes sense to outline the general principles applicable to this exceptional remedy.
The test for exceptional circumstances is formulated in Trencon Construction (Pty)
Limited v Industrial Development Corporation of South Africa Limited and Another
2015 (5) SA 245 (CC), 2015 (10) BCLR1199 (CC) as follows:
“[47] To my mind, given the doctrine of separation of powers in conducting
this enquiry there are certain factors that should inevitably hold greater
weight. The first is whether a court is in as good a position, as the
administrator to make the decision. The se cond is whether the decision of the
administrator is a foregone conclusion. These two factors must be considered
cumulatively. Thereafter a court should still consider other relevant factors.
These may include delay, bias or the incompetence of an administ rator. The
ultimate consideration is whether a substitution order is just and equitable.
This will involve a consideration of fairness to all parties. It is prudent to
emphasise that the exceptional circumstances enquiry requires an
examination of the matt er on a case -by-case basis that accounts for all
relevant facts and circumstances.”
In similar vein, in Gambling Board v Silver Star 2005 (4) SA the Court emphasised
that:
In similar vein, in Gambling Board v Silver Star 2005 (4) SA the Court emphasised
that:
“[29] [a]n administrative functionary … is generally best equipped by the
variety of its composition, by experience and its access to sources of relevant
information and expertise to make the right decision. The court typically has
none of these advantages and is required to recognise its own limitations.
Remittal is thus the general rule ‘almost always the prudent and proper
course’. However, sometimes rules need to be broken and our courts have
long since recognised that there may be instances in which substitution is the
appropriate remedy. On a big picture level, this determination has essentially
required the court to ask the question whether a decision to exercise a power
should not be left to a designated functionary.”
[172] The Applicants advance the following reasons for invoking the substitution
remedy:
172.1 Regarding the substitution of the waiver decision, the Applicants had to
commence with the principal photography even though the application was
refused as the problem was caused by the Department’s erroneous
interpretation of both the requirements of the guidelines and its d iscretion to
waive the pre-commencement requirement; and
172.2 Had the Department correctly applied the Guidelines and statutory
scheme under the BEE Act and acted promptly (having had more than three
months to process and decide the application before the commencement of
the principal photography):(a) the application would have been accepted and
(b) there would have been no need for the applicants to require a waiver of
the pre-commencement requirement.
[173] Insofar as substitution vis -à-vis the merits of the review is concerned, the
Applicants contend that this court is in as good (if not better) position as the
Department to make the decision because:
173.1 The decision on both issues – as to whether Indy and HPL complied
with the BEE requirements of t he Guidelines, and whether a sworn statement
was sufficient - turns primarily on the proper interpretation of the Guidelines.
The court is better placed than the Department to make that determination as
it is the ultimate arbiter of the legal issues in di spute, including the
interpretation of the Guidelines.
173.2 No other reasons were provided by the Department for refusing the
application. Thus the Court is well-placed to determine these issues.
173.3 The Court is well -placed to decide whether it would be irrational and
arbitrary to refuse to waive the requirement, as that would effectively preclude
the applicants from being able to claim the incentive.
[174] It must be stated from the outset that it is well -established that budgetary
considerations on their own do not preclude a Court from granting just and equitable
relief. In Minister of Health and Others v Treatment Action Campaign and Others (No
2) 2002 (5) SA 721 (CC) at para 99 the Constitutional Court said the following:
“[99] . . .Even simple declaratory orders against government or organs of
State can affect their policy and may well have budgetary implications.
Government is constitutionally bound to give effect to such orders whether or
not they affect its policy and has to find the resources to do so..”
The Court then referred to its decision in Premier, Mpumalanga and Another v
Executive Committee Association of State -Aided Schools, Eastern Transvaal [1998]
ZACC20; 1999 (2) SA 91 (CC) where it set aside a provincial government’s policy
decision to terminate the payment of subsidies to certain schools and ordered that
payments should continue for several months. It also re ferred to August and Another
v Electoral Commission and Others [1999] ZACC 3; 1990 (3) SA 1 (CC) where the
Court in order to afford prisoners the right to vote directed the Electoral Commission
to alter its election policy, planning and regulations, with manifest cost implications.
[175] Besides the fact that budgetary constraints on their own, as evidenced by the
aforegoing judgments, do not preclude the granting of a just and equitable order, the
other fundamental difficulty in the defence of the Respo ndents is that they have
failed to advance any evidence as to what budgetary constraints the Department
failed to advance any evidence as to what budgetary constraints the Department
may or may not be operating under. In Lawyers for Human Rights v Minister of
Home Affairs and Others 2017 (5) SA 480 (CC) at para 61, reaffirmed that va gue
reference to lack of resources or budgetary constraints are inadequate to sustain a
contention such as the one raised by the Department.
[176] In the present matter, did not give any information relating to its budget or how
the budget would be affect ed by the granting of the film incentive to the Applicants
through an order of the court. This court has no idea of what the precise financial
position of the Department is. In Rail Commuters Action Group v Transnet t/a
Metrorail 2005 (2) SA 359 CC, at para 88, the Court explained in the context of relief
declaring the State’s failure to take reasonable measures to protect rail commuters
thus:
“[88] A final consideration will be the relevant human and financial resource
constraints that may hamper the Orga n of State in meeting its obligation. This
last criterion will require careful consideration raised when raised. In
particular, any Organ of State will not be held to have reasonably performed a
duty simply on the basis of a bald assertion of resource cons traints. Details of
the precise character of the resource constraints, whether human or financial,
in the context of the overall resourcing of the organ of State will need to be
provided.”
[177] As I have said, in the present matter, the court has not be en presented with a
“scrupulously calculated and conscientiously propounded” costs considerations.
(See Gelyke Kanse and Others v Chairperson of the Senate of the University of
Stellenbosch 2020 (1) SA 368 (CC) at para 44). Besides a fleeting reference to
resource constraints, it remains unclear whether, in the context of the overall
resourcing of the Department, there are other issues which hamper the latter’s ability
to meet its obligations. It follows that the Department’s contention of budgetary
constraint constitutes no bar to substitution. But that is not the end of the matter as
the matter must be dealt with applying principles set out in Trencon.
[178] Insofar as substitution of the waiver decision is concerned, it will be recalled
that it is undisp uted that the Applicants had to commence with the principal
that it is undisp uted that the Applicants had to commence with the principal
photography even though the application was refused as the there was a delay on
the part of the Department with issuing a decision notwithstanding the fact that the
application was timeously presented to it. In light of the finding I have already made,
namely, that the Department erroneously interpreted the requirements of the
requirements of the guidelines and its discretion to waive the pre -commencement
requirement, however, this does not place t his court in a position to substitute the
decision of the Department refusing the waiver. Notwithstanding the findings, the
Department’s greater expertise is still required to make this decision.
[179] I turn now to consider whether this court in a good position or equipped as
the Department to consider the Applicants’ application for an incentive and whether
that decision is a foregone conclusion. The answer to this question is a resounding
“no”. It will be recalled that the present application was reje cted at the screening
stage, therefore the actual merits were never considered by the Department . If this
court were to substitute the decision of the Department and grant the incentive, it
would effectively be usurping its function. That said, I am mindful of the prejudice to
the Applicants caused by the delay of the matter but I am not convinced that it is of
such a nature as to warrant substitution on the merits. Neither can it be said that the
outcome is inevitable on the facts. In light of the findin gs made in this judgment, the
Department has some discretion left – if the matter were to be remitted to it.
Conclusion
[180] In summary, in this judgment I have held that the decision of the Department
refusing the Applicants’ foreign incentive film appl ication constitutes administrative
action as envisaged in PAJA. Furthermore, the Applicants are exempted from the
requirement to exhaust internal remedies as the remedy afforded by the Guidelines
is not effective. As to the decision to refuse the Applicant s an incentive under the
Foreign Film Guidelines and the reasons thereof, communicated to them by an email
dated 30 May 2022, and an SMS of even date, as well as another email dated 24
June 2022, is arbitrary and unlawful and must be set aside. Regarding the
interpretation of the Guidelines relating to the use of the scorecard, I have found that
a sworn statement may be used to establish the SPCV’s level 4 B -BBEE status.
a sworn statement may be used to establish the SPCV’s level 4 B -BBEE status.
Thus, the decision of the Department requiring production of a scorecard at
application stage is vitiated by arbitrariness. I have also found that the BEE Codes of
Good Practice are applicable to the Foreign Film Incentive Scheme. Insofar as the
Department’s refusal to grant waiver of the requirement that principal photography
must not comm ence before it has provided an acceptance letter in order for the
Applicant to qualify for the incentive is unlawful. It must also ne mentioned that Mr
Kgomo’s averment that Mr Sikwebu “ was quibbling with the DTIC and government
policies on the transformation in Film and television Production Industry” (to which
Mr Sikwebu strongly objected) is unfortunate and should never have formed part of
his answering affidavits as it adds no value to the adjudication of the matter.
[181] In the circumstances, the following order is issued:
181.1 It is declared that:
181.1.1 the decision of the First Respondent not to waive the
requirement in paragraph 4.3 of the Foreign Film and Television
Production and Post -Production Incentive Programme Guidelines
(“Guidelines”) not to commence principal photograph of the film
“Hammarskjold” prior to the approval of the Applicants’ claim for a
foreign film incentive is unconstitutional and invalid;
181.1.2 the decision of the First Respondent to reject the Applicants’
claim for a foreign film incentive under the Guidelines is
unconstitutional and invalid.
181.2 The First Respondent’s decisions referred to in paragraph 181.1.1 and
181.1.2 above, are hereby reviewed and set aside.
181.3 It is further declared that:
181.3.1 paragraph 5.1.1.3 of the Guidelines is irrational,
unconstitutional and invalid;
181.3.2 it is directed that paragraph 5.1.1.3 of the Guidelines is to be
read as though the words “which may be demonstrated by use of an
affidavit in terms of paragraph 5.1.1 .4” appear after the word “Practice”
at the end of the paragraph;
181.3.3 in terms of section 9(1) of the Promotion of Administrative
Justice Act 3 of 2000 (“PAJA”), the period in which the Applicants are
entitled to institute the review of paragraph 5.1.1 .3 of the Guidelines is
hereby extended;
181.3.4 the Applicants are, terms of section 7(2)(c ) of PAJA, exempted
from filing an appeal in paragraph 14.1 of the Guidelines.
181.4 It is declared that the BEE Codes of Good Practice are applicable to
applications for foreign film incentives.
181.5 The matter is remitted to the First Respondent to reconsider the
decisions that have been reviewed and set aside in terms of paragraph 171 .2
of this judgment.
181.6 The First and Second and Third Respondents are ordered to pay the
Applicants’ costs, jointly and severally, including the costs of two counsel on
Scale C.
____________
NDITA, J
Appearances
For the Applicants
Advocate Geoff Budlender SC
Advocate Mitchell De Beer
Instructed by
Barry Adams Attorneys (Barry Adams)
For the Respondent
Advocate Thembalihle Sidaki
Instructed by
State Attorney (T Lombard)