Introduction
Licensing technology from abroad into South Africa requires approval from the South African Reserve Bank’s Financial Surveillance Department for royalty or licence fee payments, and review by the Department of Trade, Industry and Competition (DTIC) to ensure agreements comply with local industrial and competition policies. Depending on the sector (e.g., medical, energy, telecoms), sector-specific regulators may also require clearance.
Key Regulatory Approvals
1. Exchange Control Approval (South African Reserve Bank – SARB)
- Any payment of royalties, license fees, or technology transfer costs to a foreign licensor must be approved under Exchange Control Regulations.
- The Financial Surveillance Department of SARB reviews agreements to ensure payments are legitimate and aligned with South Africa’s balance of payments policy.
2. Department of Trade, Industry and Competition (DTIC)
- DTIC evaluates technology licensing agreements before they are recommended to SARB.
- Focus areas include:
- Whether the agreement promotes industrial development.
- Ensuring terms are not anti-competitive or exploitative.
- Alignment with localization and empowerment policies.
3. Sector-Specific Regulators
Depending on the technology, additional approvals may be required:
- Medical technologies → South African Health Products Regulatory Authority (SAHPRA) for safety and compliance.
- Energy technologies → National Energy Regulator of South Africa (NERSA).
- Telecommunications/ICT → Independent Communications Authority of South Africa (ICASA).
- Environmental technologies → Department of Forestry, Fisheries and the Environment (DFFE).
4. Competition Law Considerations
- The Competition Commission may review licensing agreements if they involve restrictive practices, exclusivity, or market dominance.
- Technology transfer agreements must not hinder fair competition or innovation.
Comparison Table: Regulatory Layers
| Approval Body | Role | When Required |
| SARB – Financial Surveillance | Authorizes royalty/fee payments abroad | Always, if payments cross borders |
| DTIC | Reviews licensing agreements for compliance with industrial policy | Always, before SARB approval |
| Sector Regulators (SAHPRA, NERSA, ICASA, etc.) | Ensure technology meets safety, sectoral, and operational standards | Case-specific, depending on industry |
| Competition Commission | Prevents anti-competitive licensing terms | Case-specific, if agreement impacts market structure |
Risks & Challenges
- Delays: Multi-layered approvals can slow down deal execution.
- Compliance Gaps: Missing sector-specific clearance may invalidate agreements.
- Foreign Exchange Restrictions: SARB may limit or condition payments abroad.
- Competition Scrutiny: Exclusive licensing terms can trigger investigations.
Practical Steps for Compliance
- Draft a clear licensing agreement with royalty terms.
- Submit to DTIC for review and recommendation.
- Obtain SARB approval for payments abroad.
- Check sector-specific regulator requirements (e.g., SAHPRA for medical devices).
- Ensure terms comply with Competition Act.
Conclusion
Navigating technology licensing approvals in South Africa requires careful attention to multiple regulatory layers, including exchange control, industrial policy, sector-specific standards, and competition law. By following the outlined practical steps and understanding the risks, licensors and licensees can better ensure compliance and facilitate smoother technology transfer agreements.
References and Further Information
- https://www.resbank.co.za/content/dam/sarb/publications/forms/financial-surveillance-and-exchange-controls/2020/127/DTI-DTP001.pdf
- https://www.uneca.org/eca-events/sites/default/files/resources/documents/TCND/ARFSD2024/STI/case_studies/south_africa_tech_transfer_survey_final.pdf
- http://samed.org.za/wp-content/uploads/2024/08/SAMED-Reimbursement-and-HTA-Position-Paper-and-Guidance-for-Members-Aug-2024.pdf
Disclaimer
This practice note is for informational purposes only and does not constitute legal or financial advice. Readers should consult relevant professionals for advice tailored to their specific circumstances.