New Foodcorp Holdings (Pty) Ltd and Foodcorp (Pty) Ltd v Minister of Agriculture, Forestry and Fisheries and Others

The second appellant, Foodcorp (Pty) Ltd (F), was a major food manufacturing company that held long-term commercial fishing rights granted in 2005 under section 18 of the Marine Living Resources Act 18 of 1998 (MLRA). When F applied for these rights, it relied heavily on its transformation credentials, particularly that its majority shareholder, Pamodzi Investment Holdings (58.33% shareholding), was a black-owned investment company, and that 17.3% was held by an employees' share trust with 82.4% historically disadvantaged beneficiaries. In March 2010, F underwent corporate restructuring whereby all its shares were transferred to the first appellant, New Foodcorp Holdings (Holdings). Pamodzi sold its entire shareholding for over R500 million and exited the business. A new UK-based shareholder, Blue Bay Asset Management, acquired 44.44% of Holdings. The effect was a dramatic reduction in black shareholding from 59.35% to between 19.364% and 21.59%, significantly diluting F's transformation credentials. The appellants challenged paragraphs 6.2 and 6.3 of the Minister's Policy for the Transfer of Commercial Fishing Rights (TP), which required ministerial approval when a sale of shares resulted in a change of control or reduced transformation levels. They sought a declaration that these provisions were unconstitutional, unlawful and invalid, and that they did not require ministerial approval for the restructuring transaction.

• Whether paragraphs 6.2 and 6.3 of the Transfer Policy were ultra vires the Minister's powers under section 21(2) of the MLRA
• Whether the Transfer Policy, not being contained in regulations, could impose requirements for ministerial approval
• Whether paragraphs 6.2 and 6.3 were impermissibly vague
• Whether the Transfer Policy was irrational and unreasonable
• Whether ministerial approval could be required for share transactions that did not involve a formal transfer of fishing rights between legal entities
• The proper interpretation of transformation requirements in the context of commercial fishing rights

The appeal was dismissed with costs, including costs of two counsel. The judgment of the Western Cape High Court (Griesel J) was upheld, meaning paragraphs 6.2 and 6.3 of the Transfer Policy were declared valid and enforceable, and the appellants were required to obtain ministerial approval for their restructuring transaction.

The binding legal principles established are: (1) Transformation is an ongoing constitutional and statutory imperative in regulated industries, not merely a criterion for initial allocation of rights or permits. (2) Ministerial policies requiring approval for share transactions that reduce transformation levels or change control of entities holding fishing rights are intra vires the Minister's powers under the MLRA when they serve to implement the objectives and principles set out in sections 2 and 18(5) of that Act. (3) Where permits are granted subject to conditions maintaining transformation levels, and those conditions are consistent with enabling legislation and constitutional imperatives, ministerial scrutiny of transactions that may contravene those conditions is lawful. (4) A policy is not impermissibly vague where it clearly identifies the circumstances triggering its application (reduction in transformation levels) and sets out identifiable factors to be considered in exercising discretion. (5) Regulatory measures are rational where the means selected (ministerial approval requirements) are rationally related to legitimate constitutional and statutory objectives (maintaining and advancing transformation). (6) Entities obtaining benefits in regulated industries based on transformation credentials cannot claim unfair restriction when subsequently required to maintain those transformation levels as a condition of retaining their rights or permits. (7) The court may look behind the corporate veil to examine the substance and effect of share transactions on transformation, particularly where transformation was central to the initial allocation of rights.

Navsa JA made several non-binding observations: (1) The Court noted that counsel for the respondents conceded there were difficulties in justifying the provisions as authorized specifically under section 21, but held it was unnecessary to explore those difficulties given alternative legal foundations. (2) The Court observed that the Minister's stated willingness to be flexible in applying the listed factors when exercising discretion under paragraph 6.3 supported the reasonableness of the policy. (3) The Court commented that the Transfer Policy actually benefits rights holders by enabling engagement with the Minister before the more drastic remedies under section 28 (suspension or cancellation) might be invoked. (4) The Court made the pointed observation that the appellants' "professed litigation objective" of ensuring "responsible and progressive transformation" was "belied by their actions in completing the composite transactions in question." (5) The Court stated that "in our constitutional order courts have fulfilled their constitutional duty when the legislature or members of the executive have transgressed the bounds of the power vested in them," but when the executive fulfills constitutional duties impressively, "courts should say so." (6) The Court rejected the "emotionally-laden submission" about prohibiting bona fide share transactions and harming free market systems, noting that most industries are now regulated, particularly with environmental and human rights concerns. (7) The Court observed that criticizing the Minister for stating criteria in advance was "unfounded" and that such advance notice was beneficial rather than problematic.

This case is significant in South African law for several reasons: (1) It affirms that transformation is not merely a consideration at the initial allocation of rights or licenses, but an ongoing imperative that must be maintained throughout the life of those rights. (2) It establishes that regulatory policies designed to advance constitutional transformation objectives will be upheld even when they impose restrictions on commercial transactions that might otherwise be permissible. (3) It confirms that in interpreting legislation and policies in regulated industries, courts must have regard to constitutional imperatives, particularly the goal of achieving equality and redressing historical disadvantages. (4) It demonstrates that entities benefiting from transformation credentials when obtaining rights cannot subsequently divest themselves of those transformation characteristics without regulatory scrutiny. (5) It provides important guidance on the rationality test in administrative law, particularly in the context of transformation policies. (6) The case illustrates judicial willingness to look behind corporate structures to examine the substance of transactions that may undermine transformation objectives. (7) It reinforces that transformation in the South African context encompasses not just initial empowerment but sustained, quality transformation that results in real benefits to historically disadvantaged persons.