Impact of the German Supply Chain Act on South African Business

published on 15 September 2022 | reading time approx. 2 minutes

South Africa is an important supplier of German companies, especially for the auto­motive and raw materials sectors. Thus, it is important for German companies to address the due diligence requirements of the Supply Chain Act in relation to the country-specific risks of South Africa.

For South African companies, the concept of a supply chain law is not new territory. South Africa's Broad-Based Black Economic Empowerment ("B-BBEE") laws, which are intended to increase the inclusion and parti­cipation of the country's previously disadvantaged populations in the economy, include, among other things, a supply chain component. Thus, a company's B-BEEE level is measured by, i.a., the B-BBEE level of its suppliers.

With respect to the German supply chain law’s due diligence catalog, it should be noted that the overall stan­dard for the protection of human rights standards is high in South Africa. The majority of the due diligence requirements listed in the Supply Chain Act are not relevant to South Africa. However, country-specific risks sometimes include the following:

Prohibition of unequal treatment in employment

The prohibition of discrimination/unequal treatment in workplace, particularly with regards to discrimination on the basis of race, is of great importance in South Africa. The effects of Apartheid are still clearly felt in the South African economy. Discrimination on the basis of race is prohibited through laws and in the South Africa Constitution. The country's black population is still completely underrepresented in the economy.

South Africa is trying to rectify this imbalance through various laws. These laws include the B-BBEE laws, which are not mandatory. This means that companies are basically free to decide whether they want to carry out a B-BBEE rating and thus obtain a certain B-BBEE level. In addition, there are also mandatory laws with affirmative action elements. These include, for example, the Employment Equity Act, which requires companies with 50 or more employees to draw up an employment equity plan that sets out the company's affirmative ac­tion goals.

For German companies, such obligations offer the possibility of being able to verify something tangible and thus provide evidence with regards to the legally prescribed, but still very vague, effort obligations.

Occupational Health and Safety

Occupational health and safety is an issue in South Africa that is well regulated by law, but compliance does not always reach the desired standard. There are comprehensive protection regulations regarding occupational health and safety, but these are not always complied with, especially by smaller companies. When it comes to the issue of worker’s rights in South Africa such as maximum working hours and breaks during working hours, it should be noted that South Africans are generally well aware of their labour rights and are also prepared to demand them.

A very important point in relation to this duty of care is the risk of insufficient training.  Vocational training is almost non-existent in South Africa and many workers do not have adequate training for their jobs, which leads to a great occupational health and safety risks, for example, when handling machinery.

We recommend always checking suppliers and business relationships in South Africa well in advance and ma­king regular visits and conducting audits.

It is further advisable to regulate supplier relationships contractually and to counteract the above-mentioned risks with contractual obligations.