Rural Maintenance (Pty) Limited and Another v Maluti-A-Phofung Local Municipality

Maluti-A-Phofung Local Municipality, constitutionally responsible for electricity supply, concluded a 25-year Electricity Management Contract (EMC) with Rural Maintenance (Pty) Ltd in 2011 to manage and operate its electricity distribution network. Sixteen municipal employees were transferred to Rural under section 197 of the Labour Relations Act (LRA). Rural expanded operations, employed 127 employees, and invested approximately R96 million in infrastructure, systems, vehicles, and property. In 2013 the Municipality claimed the EMC was void for lack of authority and refused to accept a proposed transfer of the 127 employees when Rural purported to hand back the network and assets in 2014. Rural approached the Labour Court seeking a declarator that a transfer of a business as a going concern had occurred under section 197. The Labour Court agreed, but the Labour Appeal Court reversed the decision, finding no such transfer. Rural then sought leave to appeal to the Constitutional Court.

The application for leave to appeal was dismissed with costs.

The case reaffirms the established South African approach to section 197 of the LRA, emphasising a holistic, fact-specific assessment of whether a business is transferred as a going concern. It confirms that foreign concepts such as service provision changes under the TUPE Regulations should not be uncritically imported into South African labour law and underscores the limited circumstances in which the Constitutional Court will entertain appeals from the Labour Appeal Court.