The South African class action procedure, judicially developed rather than statutorily codified, has been used effectively in several public-interest contexts. It has not, despite occasional predictions, given rise to a meaningful tradition of securities class action litigation. The reasons for that gap are partly procedural and partly substantive, and they are worth examining.
The procedural obstacle is the certification stage. The Mukaddam framework, while flexible, places significant evidentiary demands on the representative applicant at a point in proceedings when the available information is, by definition, limited. In securities cases, where the loss to any individual investor may be modest and where the underlying conduct may turn on the interpretation of disclosure made over an extended period, certification is a substantial hurdle.
The substantive obstacle concerns the cause of action. South African company law does not recognise a freestanding remedy for shareholders against directors for misrepresentation in the same way as some comparative jurisdictions. The available causes of action — common law fraud, contractual misrepresentation, statutory disclosure claims under the Companies Act and the Financial Markets Act — each carry their own difficulties when applied to a dispersed class.
A meaningful tradition of securities class action litigation would require either statutory intervention to streamline the procedural and substantive frameworks, or a sustained appetite from the legal profession to test the limits of the existing tools. Neither is presently in evidence. The result is that significant disclosure failures in this market continue to be resolved through individual proceedings or regulatory action, rather than through collective civil redress.